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Cadbury shares soared more than 40% today as investors bet that a £10 billion takeover bid from US food giant Kraft would succeed.
Although the Cadbury board has turned down the 745p-a-share bid, Kraft is clearly prepared to take its offer directly to shareholders.
Michael Osanloo, Kraft's executive vice president of strategy, admitted there had been an “unequivocal rejection” of the terms.
Asked if Kraft was willing to make a hostile bid, he replied: “I would say we have made a very attractive proposal. We think a public dialogue is the best way to progress our communications.”
The offer on the table is for 300p in cash and 0.2589 of a new Kraft share for each Cadbury share.
A key figure will be famed US corporate raider Nelson Peltz, who has 3% of each company. The views of Warren Buffett, the world's richest man, will also be pivotal. He owns 8% of Kraft.
Cadbury shares moved up 215p to 783½p as analysts and investors speculated that a lengthy takeover battle is now likely.
The chocolate company, based in Birmingham, could seek to do a friendly deal with Hershey or Mars to fend off Kraft.
Kraft said it wants to “build a global powerhouse in snacks, confectionery and quick meals”. Osanloo said: “This combination is all about growth.” The deal is being led by Bruce Wasserstein of Lazard, one of Wall Street's most notorious figures. Cadbury is being advised by UBS, Morgan Stanley and Goldman Sachs. Kraft thinks it could squeeze cost savings of $625 million (£381 million) a year from Cadbury, but insists this would not come from job cuts in the UK.
“It is the right time for us and the right time for them,” said Osanloo. “We are highly desirous of having a constructive dialogue. We will work as diligently as possible. It is the right time for us and the right time for them to achieve a recommended offer.” A tie-up between the two has been the subject of speculation for years. A recent note from Panmure Gordon advocating the deal, suggested Kraft would have to pay closer to 800p a share to win the prize, however.
Kraft has faced accusations in the US that it is partly to blame for the global obesity crisis due to products that are high in sugar and fat. Its products include Dairy Lea cheese, Terry's Chocolate Orange and Oreo's cookies. Kraft met Cadbury chairman Roger Carr on 28 August to make its first approach.
Irene Rosenfeld, chairman and chief executive of Kraft, said: “This proposed combination is about growth. We are eager to build upon Cadbury's iconic brands and strong British heritage through increased investment and innovation. We have great respect and admiration for Cadbury, its employees, its leadership and its proud heritage.” In a letter to Cadbury's chairman Roger Carr, she said: “However, we believe that Cadbury's prospects, ability to fully realise operational efficiencies and capacity to invest are necessarily constrained given its limited scale and scope relative to larger global competitors. We see few catalysts for sustained future value creation for Cadbury as a standalone entity.”
Cadbury dates back to 1824 when John Cadbury opened his first shop in Birmingham selling cocoa and drinking chocolate.
