Kraft Foods is expected to sweeten its hostile takeover approach for Cadbury, as shares in the UK confectioner continue to trade above the offer price on expectations of a higher bid.
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Kraft’s GBP10.5bn (US$16.9bn) cash-and-stock offer currently values Cadbury at around 733 pence per share.
However, Cadbury’s shares were trading at 804 pence per share at 12.22pm (GMT) today (4 January).
Cadbury management has vehemently rebuffed Kraft’s bid, arguing that the offer “materially undervalues” the company and attacking the US conglomerate’s “low growth” model.
Shares in Cadbury have been driven up with investors betting on an improved bid from Kraft amid mounting speculation of a counter offer.
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By GlobalDataThe likes of Nestle, Hershey and Ferrero have all been linked to a possible counter bid. Ferrero and Hershey have confirmed that they are currently considering their options in this regard.
According to Jon Cox, an analyst with Kepler Capital Markets, Kraft is likely to raise its bid whether or not a competing offer emerges from another suitor.
“I think Kraft will come back with an improved bid,” Cox told just-food today. “While there probably a lot of risk-arbs in the stock, I am not sure only fundamental guys will take anything less than GBP8/share and I am sure Kraft realise this.”
Nevertheless, Kraft has repeatedly said that it will maintain a “disciplined approach” to the takeover battle, insisting that it will not sacrifice its credit rating or pay over the odds for Cadbury.
According to Kraft’s 4 December approach, Cadbury shareholders have until 1pm on 5 January to tender their shares.
If the Kraft offer is not accepted, the US food giant then has until 19 January to improve its offer, according to a deadline set by the UK’s Takeover Panel.
