Kraft move for Cadbury creates takeover buzz on FTSE

Takeover excitement made a long-awaited return to the City today after US food giant Kraft revealed details of a £10.2bn (€11.5bn) bid for Cadbury.

The proposal was rejected but Cadbury’s shares were still 41% higher and well above Kraft’s offer price of 745p, as investors bet on the chances of a bidding war involving other major players such as Mars, Nestle and Hershey.

The acquisition activity also gave a boost to the FTSE 100 Index, which stood 62 points higher at 4913.7 by mid-morning.

Other major moves in a busy start to the week included leisure group Whitbread, which climbed 15% in the FTSE 250 after a strong performance at its Costa coffee chain and a forecast of full-year results at the top end of hopes.

However, most of the attention was on Cadbury after the world’s second largest food company – maker of Terry’s and Milka chocolate – ended months of speculation about possible suitors for the UK firm.

With analysts expecting Kraft to pay a higher price or an alternative or joint bidder to emerge, Cadbury shares rose 230.5p to 798.5p.

Associated British Foods was also higher, but this was more due to the grocery-to-retail firm reporting another strong performance from its Primark fashion chain, which has seen like-for-like sales rise 7% in the past year.

The company also said it expected “some progress” in annual adjusted earnings, despite higher interest costs. Shares were up 35p to 847p.

Whitbread shares were 129p higher at 1155p after it said Costa’s like-for-like sales rose 2.7% after an “outstanding” performance over the summer.

The company’s hotel brand Premier Inn saw like-for-like sales drop 7.7% in the 24 weeks to August 13, but this was also better than City forecasts after some stabilisation in the rate of revenues decline.