Cadbury expected to receive hostile bid

STORY HIGHLIGHTS

Board of Cadbury set to meet amid expectations Kraft will go hostile with takeover offer
US group is expected to stick close to the terms of its original $16.9 billion bid for UK food group
Kraft has until 5pm on Monday to meet Takeover Panel "put up or shut up" deadline

(FT) -- The board of Cadbury, the UK food group, is preparing to meet on Monday amid expectations that Kraft will go hostile with its takeover offer.

The US group is expected to stick close to the terms of its original £10.2bn ($16.9bn) proposal. Its offer will either formalise its original proposal of 300p in cash and 0.2589 new Kraft Foods shares per Cadbury share, or increase it slightly.

If Kraft formalises its existing proposal, the value of the bid to Cadbury shareholders will be lower than when the US food group went public with the offer in early September.

At the time, the bid was worth 745p per Cadbury share. It was worth 720p or £9.8bn on Friday. On Monday Cadbury shares were 6p higher at 764p as the takeover deadline approached.

An offer that values Cadbury at about 720p is likely to be quickly rejected by Cadbury's board. "The lower the bid, the shorter the response time," a person close to Cadbury said.

Cadbury's board received public support from institutional shareholders after chairman Roger Carr turned down Kraft's indicative offer in late October.

Top Cadbury investors have said they would not be surprised to see Kraft formalise its initial proposal, but are not prepared to consider an offer seriously unless it is above £8 a share.

People close to Kraft say it is under no pressure to raise its offer significantly because there have been no counter-bidders.

Formalising its existing bid allows Kraft to see how its share price will react and gives it more time to sell its story to Cadbury investors. Mr Carr has publicly described Kraft as a "low-growth conglomerate".

Kraft's shares have fallen 4 per cent since it went public with its offer, closing at $26.78 on Friday. Cadbury's shares, which were trading at 568p before Kraft went public with its proposal, closed at 758p.

Kraft has until 5pm on Monday to meet a Takeover Panel "put up or shut up" deadline to formalise its indicative approach. If it fails to make a formal offer on Monday, it will be unable to bid for Cadbury for six months.