Lumbering Kraft chases Cadbury

US food giant Kraft Foods has made a formal bid for Cadbury two months after an unofficial approach was rejected. The terms of its £9.8bn cash-and-share offer are the same as in September's bid, although the decline in Kraft's share price since then, following lacklustre results, means the overall value of the deal has fallen from £10.2bn. Cadbury's chairman Roger Carr immediately rejected the new offer as "derisory".

What the commentators said

The good news for Cadbury shareholders is that "there's more money to be had", said Rob Cox on Breakingviews. Kraft CEO Irene Rosenfeld would hardly have embarked upon the protracted formal UK takeover process and paid hefty fees to the banks financing the deal if "she weren't prepared to do more". But her room for manoeuvre is limited. Major Kraft shareholder Warren Buffett has warned against overpaying and there is little scope for raising the price too much before Kraft ends up destroying value or jeopardising its investment-grade credit rating.

Rosenfeld may well have "overreached herself", said Nils Pratley in The Guardian. "The gap between a fair price for Cadbury and what Kraft can afford to pay looks as wide as ever." A fair price would be 850p-900p a share, compared to the 717p implied by the offer early this week. After all, said Damian Reece in The Daily Telegraph, Cadbury is "a company reformed", which is concentrating on high-growth markets, such as Latin America. But Kraft remains "a lumbering conglomerate".

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CBRY: 764p; 12m change 31%

KFT: $27; 12m change -5%

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