pershing-square

By Andrew Cleary, Zachary R. Mider, and Duane D. Stanford Jan. 19 (Bloomberg) — Cadbury Plc’s board agreed to an 11.9 billion-pound ($19.7 billion) takeover offer from Kraft Foods Inc. , ending more than four months of resistance after the U.S. company raised its bid. Cadbury investors will get 840 pence a share, including 500 pence in cash and the rest in stock, Kraft said in a statement today. Cadbury will also pay its holders an additional 10-pence dividend once the offer is unconditional. The revised bid is about 9 percent higher than Kraft’s previous bid of 769 pence, and consists of 40 percent stock and 60 percent cash. “This is a great deal for both parties,” James Bevan , chief investment officer at CCLA Investment Management Ltd., said in a Bloomberg Television interview today. “Cadbury shareholders should accept this,” said Bevan, who manages both Cadbury and Kraft shares at CCLA. Kraft Chief Executive Officer Irene Rosenfeld increased the original bid after Cadbury rejected it as “derisory” and Hershey Co. prepared to mount a rival offer. A purchase by Kraft would create a company with about $50 billion in annual sales, adding Cadbury’s Trident gum and Creme Eggs to Kraft’s Oreo cookies, Toblerone chocolate and Tang powdered drinks. Cadbury rose as much as 3.8 percent to 838 pence in London trading. Hershey is unlikely to top Kraft’s offer, two people familiar with the matter said before Kraft’s final offer was released. Kirk Saville , a spokesman for the Pennsylvania-based candy maker, declined to comment. Price Discipline As recently as Jan. 14, Cadbury called Northfield, Illinois-based Kraft an “unfocused conglomerate” with businesses in “unappealing categories.” Kraft had to raise its bid to at least 850 pence to win over Cadbury investors, according to a Bloomberg survey of nine holders. Rosenfeld faced pressure from her own shareholders to get the price right. Billionaire investor William Ackman last week joined Warren Buffett , Kraft’s biggest shareholder, in saying Kraft risked diminishing the merits of a Cadbury takeover by issuing too much stock to pay for it. The increased offer values Cadbury at 13 times 2009 earnings before interest, tax, depreciation and amortization, according to Kraft’s statement. Comparable deals in the industry valued the businesses at 14.3 times to 18.5 times, Cadbury said in its Jan. 12 defense document to shareholders. The acquisition is “the lowest multiple in the industry over the last decade,” said Andrew Wood , a senior analyst at Sanford C. Bernstein in New York. “A year from now, Kraft will be singing the praises of what a great deal they got.” Buffett’s Stake Kraft has informed Buffett of the revised deal with Cadbury, according to a person with knowledge of the matter. Buffett didn’t immediately return a request for comment sent to his assistant, Debbie Bosanek . Buffett’s Berkshire Hathaway Inc. said in a Jan. 5 statement it may support a Cadbury takeover if it concludes that the final offer “does not destroy value for Kraft shareholders.” Ackman’s Pershing Square Capital Management LP bought a $950 million stake in Kraft, or 2 percent of the company, Ackman said in a Jan. 15 interview. A purchase of Cadbury makes “tremendous sense,” he said. Kraft advanced 46 cents to $29.58 in New York Stock Exchange composite trading on Jan. 15. The stock didn’t trade yesterday because of a holiday in the U.S. Kraft said it no longer needs to have the deal approved by its own shareholders because it reduced the number of shares it plans to issue to less than 20 percent of its existing stock. Pizza Sale “It’s certainly a coup for Kraft,” said Simon Marshall- Lockyer , an analyst at Jefferies International Ltd. in London. An agreed deal is “a friendly outcome to what has been an acrimonious few months between the companies.” Kraft said this month it would sell pizza brands including DiGiorno and Tombstone to Nestle SA and use proceeds from the $3.7 billion deal to boost the cash component of its Cadbury bid. The Toblerone maker has until Feb. 2 to gain acceptance from a majority of Cadbury investors. “Kraft provides some strength in the U.S. that Cadbury doesn’t have, and Cadbury provides some strength internationally that Kraft doesn’t have,” said Don Yacktman , founder of Yacktman Asset Management Co., which holds Kraft shares. Lazard Ltd., Centerview Partners, Citigroup Inc., and Deutsche Bank AG are advising Kraft on the deal. Cadbury is using Goldman Sachs Group Inc., Morgan Stanley, and UBS AG. Cadbury CEO Todd Stitzer embarked on a week-long blitz in London and New York in December to persuade Cadbury shareholders not to accept Kraft’s offer, then worth about 733 pence a share. Rosenfeld also met with investors and said on a November earnings call that Kraft was well positioned for “top-tier performance” with or without Cadbury. Forbes List Some analysts had projected the U.K. company would fetch 900 pence a share after Kraft disclosed its offer in September. Those estimates began to drop when Kraft made its offer formal Nov. 9 without raising the bid and no competing ones emerged. Rosenfeld, 56, spent more than 25 years at Kraft, with a two-year interruption in 2004 to run PepsiCo Inc.’s Frito-Lay snack-food unit. Last year, Forbes magazine ranked her No. 6 on its list of the world’s most powerful women, three behind PepsiCo CEO Indra Nooyi . To contact the reporters on this story: Andrew Cleary in London at acleary7@bloomberg.net ; Zachary Mider in New York at zmider1@bloomberg.net ; Duane D. Stanford in Atlanta dstanford2@bloomberg.net .