Kraft Foods has gone hostile in its bid to buy Cadbury but didn't sweeten its first bid, drawing an immediate rejection from the British candymaker in what likely will be a lengthy takeover struggle.
Taking the same offer directly to Cadbury shareholders likely means Kraft is betting no competing bids will emerge for the maker of Dairy Milk and Creme Eggs. The early gambit also leaves the company room to take the bid higher.
Kraft made the $16.4 billion offer hours before a Monday deadline imposed by Britain's takeover law that required the company to make a formal offer or back off for six months. Kraft has 28 days after making the offer to file a prospectus, which will trigger more deadlines that could last months.
The maker of Oreo cookies, Oscar Mayer meats and Nabisco crackers maintained its per-share offer of 300 pence in cash and 0.2589 new Kraft shares. The deal's value fell from its original $16.7 billion because Kraft's shares have fallen since the first offer was announced in September.
Cadbury Chairman Roger Carr offered a blunt assessment of the bid: "Kraft's offer does not come remotely close to reflecting the true value of our company."
Now it's up to Cadbury's shareholders to decide.
Most likely, they'll hold out for a higher offer, analysts say.
"Kraft probably does need Cadbury more than Cadbury needs Kraft," wrote analyst Jeremy Batstone-Carr.
A combination of the two would create a company with at least $50 billion in annual revenue.
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