Kraft Foods Incorporated must raise its hostile 11bn ($17.9bn) bid for Cadbury Plc by at least 10 per cent to stand a chance of capturing the United Kingdom maker of Dairy Milk chocolate, an investor survey shows.
Kraft, whose offer is worth about 771 pence a share, needs to raise that to at least 850 pence, the median price named by nine Cadbury shareholders, who together account for about 11 per cent of the shares. Responses ranged from 800 pence to 900 pence. A deadline to increase the bid passes on January 19.
According to Bloomberg, Cadbury closed at 793.5 pence on January 15, 2.9 per cent above the value of Kraft‘s bid, reflecting the chance the offer will be raised, or a rival suitor such as Hershey Co. will emerge.
Hershey is stepping up efforts to prepare a bid and plans to make a decision after Kraft‘s final offer, according to people with knowledge of the matter. Kraft’s Chief Executive Officer Irene Rosenfeld has vowed to stay ”disciplined” on price.
”There‘s a lot of value in Cadbury,” said Peter Langerman, CEO of Mutual Series, which is a subsidiary of Franklin Resources Incorporated which has a 7.7 per cent stake in Cadbury. ”When you look at the numbers that make sense for both Cadbury and Kraft, their offer is materially lower than that,” he said January 15 in a telephone interview.
Franklin Resources will reject the bid if it is not improved, Langerman said. The UK company‘s second-largest investor, Legal & General Group Plc, said it remains opposed to Kraft‘s offer on valuation grounds.
”Our position on Cadbury is unchanged; we continue to believe that the current Kraft bid does not reflect the long- term value offered by the company on a standalone basis,” Mark Burgess, head of equities at Legal & General, said in a statement. The insurer owned about 70 million Cadbury shares, a 5.1 per cent stake, according to a January 13 filing.
Kraft will on Monday raise its bid for Cadbury to at least 820 pence per share, the London-based Sunday Times said, without saying where it got the information. Kraft will boost the cash component of its offer to woo investors who do not want Kraft shares, the newspaper said.
Warren Buffett‘s Berkshire Hathaway Incorporated, the top stockholder in Kraft, voted against the foodmaker‘s proposal to issue as many as 370 million shares for the Cadbury purchase.