SHARES in Cadbury were the largest fallers in the UK's leading share index last night as analysts questioned the prospects of a knock-out bid from US predator Kraft.
The giant American food company said on Tuesday that it would "remain disciplined" in pursuing a bid for Cadbury, after it lowered its outlook for sales for the coming year.
But yesterday analysts warned that Irene Rosenfeld, the chief executive
of Kraft, is willing to pay only 800p a share for Cadbury's after she cautioned on overpaying for the confectionery group. It was thought Kraft would be willing to pay up to 875p or even 900p.
The news sent shares in Cadbury down 11p to close at 766p. Kraft has until 9 November to come up with a firm offer after its initial cash and share proposal, now worth around 717p a share, was swiftly rebuffed by Cadbury, which described the proposal as an "unappealing prospect".
Martin Deboo, analyst at Investec Securities, one of the few big brokers not involved in advising or financing on the bid battle, believes Kraft will be willing to pay more than its initial offer and says Cadbury is still a strategically highly attractive deal for it. His maximum 800p bid would be made up of 400p of cash, up from 300p of cash in the original bid.
Deboo said: "We now think Kraft will be willing to pay only 800p." Deboo had previously thought Kraft would be willing to pay up to 875p.
The news comes as reports suggested that Kraft had obtained $9 billion (£5.5 billion) of financing for its bid from nine banks. The lead underwriters are understood to be Citigroup, Deutsche Bank and Barclays.
"There has been a lot of speculation about what we can afford," Rosenfeld said during a conference call for analysts and investors late on Tuesday night. "What we can afford is not relevant. What is relevant is what Cadbury is worth."
Deboo rates Cadbury's chances of remaining independent as high as 40 per cent and puts a standalone value on Cadbury's share at 750p. Relative to its pre-bid level of 568p, he says the stock market has risen and earnings updates have gone through supporting a re-rating which would support this value.
Analysts at JP Morgan said: "We now assume a lower price on lack of competing bids, lower synergy assumptions, and our growing belief Kraft could walk away (and come back only a year later when investors would have a better sense of (Cadbury's] Vision into Action's true potential).
"We doubt Kraft will go over 780p. Such an offer with only a 30 per cent stock component may be enough."
Kraft needs to show Britain's Takeover Panel that it has committed financing in place before Monday, when it has to bid for a second time or walk away for six months.
