Deadline looms for Kraft to make Cadbury bid

A deadline loomed Monday for Kraft Foods Inc. to make a formal offer for British candy maker Cadbury PLC or walk away for six months.

Shares in Cadbury have soared in recent days as investors speculate on a multibillion hostile proposal from Kraft, the maker of Oreo cookies, Nabisco crackers and its namesake cheese.

But the the prospect of an offer has caused some consternation in Britain, where the 195-year-old Cadbury is a much-loved brand — its Dairy Milk is the country's top-selling chocolate bar.

Cadbury, which also makes Green & Black's chocolate brand, Halls lozenges and the Trident and Dentyne gum brands, has already spurned a $16.7 billion cash-and-stock offer from Kraft.

Reports over the weekend suggested that Kraft will now make a bid directly to shareholders. It has until 5 p.m. (1700 GMT) on Monday to table a firm offer — or under British takeover rules it will be prohibited from making a new offer for six months.

It is expected to sweeten the offer following a decline in its own share price.

Kraft's original bid of 300 pence in cash and 0.2589 new Kraft shares for each Cadbury share was worth 745 pence per Cadbury share.

The decline in Kraft's shares put the offer at around 720 pence currently. In contrast, shares in Cadbury have risen about 30 percent since late August, and in early trade on Monday were trading up 0.5 percent at 762 pence.

Cadbury last month reported higher-than expected sales for the third quarter, increasing pressure on Kraft to up its bid. The British company also lifted its revenue forecast for this year to "around the middle" of its previous guidance of 4-6 percent growth.

Billionaire Warren Buffett, whose investment firm Berkshire Hathaway is the biggest shareholder in Kraft, has said the Cadbury offer is "pretty full" as it is.

Kraft reported a lower quarterly profit last week because of a big one-time gain a year ago and a 6 percent decline in revenue but still lifted its yearly earnings outlook.

Kraft faces opposition from a band of vocal supporters of an independent Cadbury.

Felicity Loudon, the granddaughter of former Cadbury Brothers managing director Egbert Cadbury, has also been an outspoken critic of any deal, saying she was "particularly saddened by the possibility of one of the last remaining British icons disappearing into an American plastic cheese company."

In an attempt to appease unions, Kraft has pledged to save some 500 jobs at Cadbury's Somerdale chocolate factory in Bristol, central England, reversing a decision by the British company's board to transfer production of chocolate at the plant to Poland.

But unions say they have not been given a detailed proposal on Kraft's commitment to chocolate making in Britain and point to the U.S. company's decision to shut its Terry's Chocolate Orange factory in York, northern England, four years ago, transferring production to eastern Europe.

Kraft, which also makes Kenco and Maxwell House coffee and Toblerone chocolate, said when revealing its previous bid in September that a merger with Cadbury would create a "global powerhouse."

But Cadbury said the approach "fundamentally undervalued" the business and said that joining Kraft was an "unappealing prospect".

A combination of the two would create a company that generates at least $50 billion in total revenue. Kraft is the largest food company in the U.S. and No. 2 worldwide to Nestle, which would keep its No. 1 position even if Kraft adds Cadbury.

Despite speculation of a bidding war when Kraft's initial approach was revealed in September, rival interest from the likes of U.S. candymaker Hershey Co. has yet to emerge and consumer goods group Unilever NV publicly ruled itself out last week.