Kraft took its $16.3 billion bid for British chocolate and chewing gum maker, Cadbury, directly to shareholders after the Cadbury board rejected the offer as too low.
Kraft, which makes Ritz crackers and Oreo cookies, offers $4.90 in cash and 0.2589 new Kraft shares for every Cadbury share. The offer values each Cadbury share at $12.02, a 26 percent premium to the price before Kraft made its original proposal.
In its filing with the London Stock Exchange, Kraft insisted its latest pitch was full and fairly priced, pointing out that Monday’s offer had an enterprise value of 13.9 times Cadbury’s earnings before taxes, interest, amortization and depreciation, or Ebitda, and Cadbury’s own acquisition of Adams in 2002 was valued at 12.8 times Ebitda.
After Kraft’s announcement, Cadbury’s shares initially dropped 1.72 percent in London, signifying pessimism among the investors regarding the deal’s materialization.
“Kraft’s offer does not come remotely close to reflecting the true value of our company,” said Cadbury’s chairman, Roger Carr, “and involves the unattractive prospect of the absorption of Cadbury into a low-growth conglomerate business model.”
“The repetition of a proposal which is now of less value and lower than the current Cadbury share price does not make it any more attractive,” he said. “As a result, the board has emphatically rejected this derisory offer and has strengthened its resolve to ensure the true value of Cadbury is fully understood by all.”
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