Cadbury turns sour over Kraft takeover

Cadbury, the West Midlands-based chocolate giant, today launched a stinging attack on US food giant Kraft over its £10.2 billion takeover bid.

The Dairy Milk firm's chairman Roger Carr dismissed the "unappealing prospect" of Cadbury being absorbed into what he described as "Kraft's low-growth, conglomerate business model".

In an open letter addressed to Kraft's chief executive Irene Rosenfeld, he detailed his opposition to the unsolicited bid, and said the offer fundamentally undervalued the business, and was of "uncertain value" to shareholders.

Around 2,000 people work at its Bournville headquarters in Birmingham.

Kraft, the firm behind brands including Dairylea, Kenco coffee and Terry's Chocolate Orange, made the cash-and-shares approach to Cadbury a week ago.

But while Cadbury's shares have soared by 36.5 per cent in the past week, Kraft's have slumped by seven per cent, reducing the value of a deal.

Mr Carr placed strong emphasis on Cadbury's position as a focused confectionery business in the letter - the firm discarded its US beverages business last year.

Uncertain

"Under your proposal, Cadbury would be absorbed into Kraft's low-growth, conglomerate business model, an unappealing prospect which contrasts sharply with our strategy to be a pure play confectionery company," he said.

Kraft, he added, has a "considerably less focused business mix and historically lower growth" than his firm.

"In addition, the proposal is of uncertain value for Cadbury shareholders as underlined by the movement in the Kraft share price since your announcement," he said.

The letter opens the door to a further bid by Kraft, with analysts already speculating that the US firm might need to up its 745p-a-share offer to at least 800p - equivalent to £11 billion - to secure agreement.

By Business Editor Jim Walsh