Kraft melts Cadbury's defence

$27b takeover will create world's largest confectioner; fears of job losses in Britain up

LONDON: Iconic British chocolate maker Cadbury fell to an &pound11.9 billion (S$27 billion) takeover by the United States food giant Kraft yesterday, creating the world's largest confectioner.

The deal, struck after hours of negotiations, brought to a conclusion one of the most fiercely contested takeover battles seen in recent years. It also ended the nearly 200-year independence of Britain's most famous candy company.

The pair announced in a statement that Cadbury management had agreed to a takeover worth 840 pence per share - valuing the British group at the equivalent of US$18.9 billion (S$27 billion).

Kraft CEO Irene Rosenfeld had to inject more cash into her bid and drop the number of new Kraft shares in the offer to win over Cadbury chairman Roger Carr and mollify her top shareholder, billionaire investor Warren Buffett, who had warned her not to overpay or issue too many new Kraft shares.

The combined entity would be the world leader in chocolate and sweets, ahead of privately owned Mars-Wrigley, and No. 2 globally in the high-growth chewing gum market, said Kraft.

It will provide large cost savings and bring under one roof more than 40 confectionery brands with annual sales totalling more than US$100 million and combined revenues in 2008 of close to US$60 billion.

Some in Britain, however, are disgruntled at the prospect of a historic brand losing its independence.

Cadbury traces its roots to the grocery store opened in 1824 by John Cadbury in Birmingham.

A Quaker, Cadbury believed cocoa and drinking chocolate were healthy alternatives to alcohol, considered to add to the miseries of the working class.

Its Dairy Milk chocolate brand was launched in 1905 as a challenge to dominant Swiss chocolate makers. It has long been the most popular chocolate bar in Britain - and the company sells more than 250 million bars every year in 33 countries around the world.

'We have great respect for Cadbury's brands, heritage and people. We believe they will thrive as part of Kraft Foods,' said Ms Rosenfeld.

Mr Carr, who had led a spirited defence against Kraft's previous offer, said he believed the deal 'represents good value for Cadbury shareholders'.

Kraft had made a &pound10.2 billion offer for Cadbury last September, which was dismissed as 'derisory'. The US firm subsequently improved the offer after selling its North American pizza division to Swiss rival Nestle for US$3.7 billion.

Meanwhile, US chocolate maker Hershey had been considering a counter-offer for Cadbury, the Wall Street Journal reported last week, adding that it planned to bid at least US$17.9 billion.

Cadbury unions have opposed the move, fearing big job cuts. British politicians have also weighed in on the issue, with general elections looming.

British Prime Minister Gordon Brown told a news conference after the deal was announced that he wanted to protect investment and jobs in Cadbury.

'The one thing I want to say is this: We are determined that the levels of investment that take place in Cadbury's in the United Kingdom are maintained,' he said.

Cadbury employs 45,000 staff worldwide, including 5,600 people at eight factories in Britain and Ireland.

There have been fears about job losses in Britain, with trade union Unite warning that Kraft would be saddled with huge debts, leading it to axe 7,000 posts at Cadbury and 20,000 at the company's sub-contractors.

AGENCE FRANCE-PRESSE, ASSOCIATED PRESS, REUTERS

186 years of chocolate

PHOTO: ASSOCIATED PRESS

Cadbury is one of Britain's best known and loved brands. Here is a brief history of the world's second-largest confectioner:

1824: John Cadbury, from a wealthy Quaker family, opens his shop at 93 Bull Street, then a fashionable part of Birmingham. Apart from selling tea and coffee, he sells cocoa and drinking chocolate, which he prepares himself using a mortar and pestle.

1897: Cadbury launches its first edible milk chocolate, created by adding dried milk powder to cocoa solids, cocoa butter and sugar.

1905: Cadbury launches Dairy Milk, a new milk chocolate that contains far more milk than anything previously tasted, to compete against the leading brands of Swiss milk chocolate.

1915: Cadbury Milk Tray is introduced, a no-frills box of chocolates for everyday eating.

1920: Cadbury Flake is introduced.

1921: Cadbury opens its first overseas factory in Tasmania, followed by New Zealand in 1930.

Mid-1920's: Dairy Milk becomes the brand leader in the UK, a position that it has enjoyed ever since.

1928: Fruit and Nut introduced.

1933: Cadbury adds WholeNut to the Dairy Milk family.

1969: Merges with drinks maker Schweppes to create Cadbury Schweppes.

1971: Buys London confectioner Pascalls, maker of chocolate Eclairs.

2003: Becomes the world's biggest confectioner after buying the US' Adams group, maker of chewing gum brands like Trident and Stride.

2005: Acquires Green & Black's, the UK premium chocolate brand.

2006: Sells continental European business to Lion and Blackstone for 1.85 billion euros.

2008: Demerges Cadbury Schweppes in May 2008, following shareholder pressure, creating the London-listed confectionery group Cadbury and US soft drinks group Dr Pepper Snapple.

2009: Sells Australian beverage business Schweppes Australia to Asahi Breweries for A$1.18 billion (S$1.5 billion), completing its exit from soft drinks.

2010: Accepts takeover bid from US food giant Kraft.

SOURCE: THE TIMES, REUTERS

Source: Straits Times, 20 Jan 2010.