The European Commission has set a one-month deadline to rule on the possible hostile takeover of Cadbury by US food giant Kraft, the EU competition regulator said last week.
It said it will decide by December 14 whether it considers that a takeover could disturb competition in the sector, but gave no further details. Kraft made a hostile £9.8bn ($16.3bn) bid for Cadbury recently — an offer that was swiftly rejected by the UK confectioner, which described it as ‘derisory’, as it is no higher than an initial offer dismissed by the Cadbury board in September.
The bid’s launch opens a 28-day window for Kraft to put documents detailing the offer before Cadbury shareholders, and it would then have up to 60 days to collect enough shares to seal the deal. Nevertheless, analysts have suggested that a much higher bid is needed for shareholders to accept it. Meanwhile the Commission could still clear the deal if it finds no competition concerns, but it is obliged to analyze the transaction because of the high turnover of the two companies. If the Commission rules that the takeover could cause competition problems, there would still be several options available to Kraft, including making divestments or asset sales. In that situation, the Commission would have an additional ten days to assess any proposed remedy.
Kraft is the world’s second biggest food manufacturer, behind Nestle, while Cadbury is second only to Mars in the confectionery sector. Kraft’s interest in Cadbury stems from the confectioner’s broader exposure to international markets, particularly its strong position in developing markets like India and Mexico. Kraft chairman and CEO Irene Rosenfeld has said that combining the businesses would significantly expand the reach of both companies and create synergies worth in the region of $625m. Cadbury chairman Roger Carr, on the other hand, has emphasized that he perceives Cadbury as “an exceptional standalone business” and said a takeover by Kraft would involve “the unattractive prospect of the absorption of Cadbury into a low growth conglomerate business model.”