Kraft sets sights on Cadbury

07 September 2009

NORTHFIELD, Illinois: Kraft, America's biggest food manufacturer, has made a bid of $16.7 billion (€11.6bn; £10.2bn) for Cadbury, the UK-based confectionary company, and appears undeterred by the rejection of its initial offer.

According to Kraft, a merger of the two firms would produce "a global powerhouse in snacks, confectionery and quick meals, with an exceptional portfolio of leading brands around the world."

The newly-combined entity would have revenues reaching around $50bn, and allow for some $625 million in cost savings a year, the owner of Oreo and Dairylea said.

Kraft originally suggested the tie-up late last month, following a meeting between its chairman, Irene Rosenfeld, and Roger Carr, Cadbury's chairman. 

In a statement, Rosenfeld said "this proposed combination is about growth. We are eager to build upon Cadbury's iconic brands and strong British heritage through increased investment and innovation."

"We have great respect and admiration for Cadbury, its employees, its leadership and its proud heritage," she continued.

In a letter to Carr, published today, Rosenfeld added that "Cadbury's prospects, ability to fully realise operational efficiencies and capacity to invest are necessarily constrained given its limited scale and scope relative to larger global competitors."
In a further letter to Carr, Rosenfeld stated she was "disappointed" that he had "unequivocally rejected" the offer made in August.

However, she did affirm "our level of seriousness and enthusiasm for pursuing this opportunity. We are willing to commit substantial time and financial resources to do so."

Earlier this year, Panmure Gordon, the stockbroker and investment bank, said Cadbury would be a "perfect compliment to Kraft's strengths," and would help it make gains in emerging markets, and key sectors such as the gum category.

Despite the rejection of its initial bid, Kraft, which is based in Illinois, remains enthusiastic about securing a deal.

"Kraft Foods is committed to working toward a recommended transaction and to maintaining a constructive dialogue and is announcing this proposal as a means to encourage and further that process," it said in a statement.

Data sourced from Wall Street Journal/Financial Times; additional content by WARC staff