Kraft boss tests water over Cadbury deal

The chief executive of US giant Kraft will sound out major shareholders in London this week over its potential takeover of Dairy Milk maker Cadbury.

Irene Rosenfeld is understood to be holding talks with Kraft’s major investors following the rejection of its £10.2bn (€11.2bn) proposal two weeks ago.

Although sources close to the firm described the meeting as “routine”, gauging the potential support for a higher price than the snubbed 745p approach is likely to be top of the agenda.

Kraft’s biggest shareholder is billionaire Warren Buffett, who has publicly warned against overpaying in any bid for Cadbury. Barclays, State Street and Vanguard also have stakes of more than 3%.

While Kraft refused to comment on Ms Rosenfeld’s itinerary, she could also take informal soundings from major investors in Cadbury over the price required for a recommended bid.

Legal & General Investment Management, the largest shareholder in Cadbury with a stake of more than 5%, has already said the level of Kraft’s proposal “materially undervalued” Cadbury, using the takeover of chewing gum giant Wrigley by Mars last year as a valuation guide.

L&G declined to comment on whether the group had any meetings with Kraft lined up this week.

But Cadbury’s share price is still trading more than 5% above the level of Kraft’s cash-and-shares offer – a clear signal that traders believe a higher bid from Kraft or takeover interest from rivals Nestle or Hershey is in the offing.

A deal between Kraft and Cadbury, which is the world’s second biggest confectionery firm behind Mars, would create a “global powerhouse” with annual sales of around $50bn (€34bn), according to Kraft.

The US firm has also sought to give assurances that a deal between the two would see jobs protected and possibly even created.

Kraft hopes to keep open Cadbury’s Somerdale facility near Bristol in England, which is currently scheduled to close in early 2010, while also investing in the firm’s Bournville factory near Birmingham.