British candy maker Cadbury PLC on Tuesday accepted and recommended to shareholders Kraft’s improved takeover offer worth $18.9 billion, potentially ending a months-long corporate battle to create the world’s largest maker of chocolate and sweets.
The U.S. food conglomerate said the board of Cadbury, maker of Creme Eggs and Dentyne gum, had unanimously endorsed the offer worth 840 pence per share, or 11.9 billion pounds in total.
The revised bid is for 500 pence cash and 0.1874 new Kraft shares for each Cadbury share, still somewhat less than some analysts believed the company is worth.
Kraft Foods Inc.’s previous offer of 10.5 billion pounds ($17.1 billion) valued Cadbury at about 770 pence, but was dismissed by the British company’s management as “derisory.”
The combined companies would be the world leader in chocolate and sweets, Kraft said, and No. 2 globally in the high-growth gum market.
“We have great respect for Cadbury’s brands, heritage and people. We believe they will thrive as part of Kraft Foods,” said Kraft’s CEO Irene Rosenfield.
“This recommended offer represents a compelling opportunity for Cadbury shareholders, providing both immediate value certainty and upside potential in the combined company.”
Cadbury Chairman Roger Carr, who had led a spirited defence against Kraft’s previous offer, said he believed the deal “represents good value for Cadbury shareholders.”
Kraft still has to persuade a majority of Cadbury shareholders to accept the deal, and the door remains open until Saturday for The Hershey Co. to jump in with a rival bid.
Cadbury shares were up 3.3 percent at 834 pence following the announcement.
Kraft predicted pre-tax cost savings of at least $675 million a year once the combination has been working for three years.
Tuesday was the deadline for Kraft to raise its offer. Cadbury shares moved above 800 pence on Monday, indicating the market was looking for Kraft to jump to that level or higher.
The British company had fought hard against Kraft’s initial offer announced in December, rejecting it as a “derisory” bid from an unfocused, underperforming conglomerate.
The agreed price is 13 times Cadbury’s earnings before interest, taxes, depreciation and amortization; Cadbury had argued that similar recent takeovers in the sector had been for 14 times EBITDA or more.
Kraft may still have a battle winning endorsement from Cadbury shareholders, and The Hershey Co. has until Saturday to decide whether it wants to make a rival bid.
February 2 is the deadline for Kraft to win acceptance from holders of a majority of Cadbury shares.
David Cumming, head of U.K. equities at Cadbury shareholder Standard Life, had said Monday that Kraft needed to aim above 900 pence to secure support from long-term shareholders. But on Tuesday, he signalled the fight was over. “I probably won’t go against the view of Cadbury’s management,” he told the BBC.
Kraft, based in Northfield, Illinois, had raised the cash portion of its offer earlier this month after selling its North America pizza business to Nestle for $3.7 billion.
The report of a deal drew a sharp response from Felicity Loudon, a great granddaughter of Cadbury’s founder Egbert Cadbury.
“I don’t know what they’re doing,” Loudon told Sky News. “Kraft will have to asset strip to afford anything.”
