Kraft: Cadbury Accepts Final Offer

Kraft Foods (KFT) announced that Cadbury PLC (CBY) has accepted its final offer, which values Cadbury at £11.7 billion ($19 billion) or 850 pence per share (approximately $13.86 per share).

As per the offer, Cadbury shareholders will receive 500 pence (about $8.15) in cash and 0.1874 New Kraft Foods shares for each share of the UK confectioner. In addition, Cadbury shareholders will receive 10 pence per Cadbury share in the form of a special dividend.

Kraft had first proposed a takeover of Cadbury in September 2009 for £10.2 billion (approx. $16.5 billion). However, Cadbury had rejected the offer. Kraft had later offered an increased proportion of cash in its tender offer. The company sold its North American pizza business to Nestle for $3.7 billion in cash and said that it would use the proceeds to increase the cash proportion. But Cadbury’s Board again rejected the offer stating that the confectioner’s better-than-expected performance in the fourth quarter makes Kraft’s offer even more unattractive.

At last, Kraft has now succeeded in convincing Cadbury with its new offer. Cadbury’s Board has unanimously recommended its shareholders to accept the terms of the offer. Kraft has indicated that the final offer is worth 13.0 times Cadbury's underlying 2009 EBITDA.

Following the combination with Cadbury, Kraft expects to revise its long-term growth targets to 5%+ for revenue and 9%-11% for EPS, from its previously announced 4%+ for revenue and 7%-9% for earnings. The company believes that the acquisition will be accretive to its 2011 earnings by 5 cents per share. It expects to realize annual cost savings of approximately $675 million by the end of third year.