US food giant Kraft Foods will have to up its bid for Cadbury to over 900p a share if it wants to win the support of one of the Dairy Milk makers biggest UK shareholders, Standard Life.


David Cumming, head of UK equities for Standard Life, this morning (18 January) told BBC Radio 4’s ‘Today’ show that the shareholder does not think Cadbury would be better run under new owners.


“I think Cadbury is quite a well-run business and they’ve done a good job, the existing management team,” Cumming said. “They’ve got quite good sales growth and they’ve still got margin recovery potential, so if Kraft want to get Cadbury’s, they need to pay a full price to get long term shareholders like that on their side – and that price would have to be, in my view, above GBP9 (US$14.75) a share.”


Cumming added that further consideration would need to be taken over a possible counter-bid from Hershey.


“If there’s competition you could even get a higher price than that, but the price in the press I noticed at the weekend talking about GBP8 to GBP8.50 – that would not secure support from companies like ourselves,” Cumming insisted.

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Standard Life Investments’ shareholding in Cadbury is under 1%.


Cadbury’s largest shareholder, Franklin Resources, also said it would “reject” the bid “if it isn’t improved”, according to Peter Langerman, CEO of subsidiary Mutual Series, which manages the group’s 7.7% holding.


Kraft has until tomorrow (19 January) to increase its bid for Cadbury.


Cadbury has repeatedly labelled Kraft’s GBP10.5bn hostile takeover bid as “derisory” and industry analysts broadly agree that the US company needs to up its offer.


Independent analyst James Amoroso said last week that while it is still a “one-horse race”, the offer as it stands, is “far from exciting”.


“I can certainly imagine Kraft shareholders not wanting Kraft to raise its offer as it would simply be more than they like to risk,” Amoroso told just-food. “Warren Buffett’s recent reaction underlines this.”


Sanford Bernstein analyst Andrew Wood said he perceives “increasing concern” that a deal may fall through, particularly given Buffett’s rejection of Kraft’s plan to issue up to 370m shares to fund a Cadbury acquisition and still no counter-bidder against Kraft.


Reports today have suggested that Kraft appears poised to increase its hostile bid for Cadbury with an 820p, or GBP11bn, offer.


However, a spokesperson for Kraft said: “Kraft has got until midnight to make a decision so we can’t give any guidance. If we do have anything to share with regards to price, it will be in an announcement.”

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