Kraft Foods, Cadbury agree $19.5 bln deal

a personal message to kraft... whatever you do, please do not mess with the caramello bar.

now for the news (hold on to your seats):


By JANE WARDELL and ROBERT BARR, Associated Press Writers Jane Wardell And Robert Barr, Associated Press Writers 28 mins ago

LONDON – After months of fierce resistance, Cadbury's about-face to accept a sweetened 11.5 billion pound ($19.5 billion) takeover from Kraft Foods Inc. — forming the world's biggest candy company — has alarmed British unions, lawmakers and chocolate lovers.

With Cadbury shareholders expected to agree to the deal and a rival bid from The Hershey Co. looking less likely, opponents fear the U.S. multinational's impact on one of Britain's oldest and best-loved brands.

Just days after Cadbury declared its suitor a "low growth" company with a "long history of underperformance," the British maker of Dairy Milk chocolates and Dentyne gum capitulated to a raised bid of 840 pence ($13.78) per share.

The deal, comprising 500 pence cash and 0.1874 new Kraft shares for each Cadbury share, is a 9 percent premium to its previous 770 pence offer and 50 percent higher than Cadbury's market value before Kraft, based in Northfield, Illinois, went public with its approach in September.

Cadbury stock was trading just under that level, at 836.5 pence, up 3.6 percent, in Tuesday afternoon trade. Shares in Kraft, the maker of Toblerone chocoloate, Velveeta processed cheese and Oreo cookies, were down 2.5 percent at $28.85.

The combination of the pair would create the world's biggest confectionary company, replacing Mars Inc., and Kraft CEO Irene Rosenfeld said the deal provides "both immediate value certainty and upside potential" as she tried to appease concerns about the loss of Cadbury's iconic status.

The company's roots go back to the grocery store opened in 1824 by John Cadbury in Birmingham, central England. A Quaker, Cadbury believed cocoa and drinking chocolate were healthy alternatives to alcohol, considered to add to the miseries of the working class.

The popular Dairy Milk bars were launched in 1905 as a challenge to dominant Swiss chocolate makers.

"We have great respect for Cadbury's brands, heritage and people," Rosenfeld said. "We believe they will thrive as part of Kraft Foods."

But unions are worried there were no clear guarantees from Kraft that it won't switch manufacturing of some of the 186-year-old company's chocolates to eastern Europe, sacrificing thousands of British jobs.

"This is a very sad day for U.K. manufacturing. A successful, iconic, independent U.K. brand will now be owned by a giant company with massive debt," said Jennie Formby of the Unite union, which had campaigned against Kraft's offer.

"We have very real fears about how Kraft will repay its debt, particularly as it has ratcheted it up still further in order to purchase Cadbury," she added.

Four Labour Party lawmakers, whose electorates cover two key factories in Britain's manufacturing heartland, said in a joint statement they were worried "about the kind of future that Cadbury's would have as part of this giant multinational whose corporate priorities are decided a long way away from the West Midlands."

The deal, one of the largest transnational takeovers since the credit crunch, is further sign that food companies are seeking to gain scale by combining, after Mars bought William Wrigley Jr. Co. in 2008 for $23 billion.

A Kraft-Cadbury combination will create a portfolio with more than 40 confectionary brands, each with annual sales in excess of $100 million.

Kraft, attracted by Cadbury's extensive reach in lucrative emerging markets, sidestepped concerns from its own major shareholders by reducing the share portion of the deal below 20 percent — negating the need for it to be approved by shareholders.

Billionaire investor Warren Buffett, whose Berkshire Hathaway is Kraft's biggest shareholder, voted against Kraft's proposal earlier this month to issue more shares to fund the takeover bid. Kraft made the proposal after raising the cash portion of its offer by selling its North America pizza business to Nestle for $3.7 billion.

Under the revised offer, Kraft will issue 265 million new shares representing approximately 18 percent of the existing issued share capital and 15 percent of the company's enlarged issued share capital.

There was surprise at the overnight change in tune from Cadbury Chairman Roger Carr, who had led a spirited defense against Kraft, talking up the British company's standalone strengths, over the past four months.

The man who earlier this week said Rosenfeld's shareholders had been forced to deal with "repeated disappointment from a management team who have promised much and delivered less," told his own shareholders on Tuesday that the revised deal "represents good value."

"Although we always considered that 850 pence could be enough to win shareholder support we have to admit surprise at how meekly Cadbury has apparently acquiesced," said Jeremy Batstone-Carr, analyst at Charles Stanley & Co.

Only last week, Batstone-Carr added, the Cadbury chairman "had confidently predicted that the company's share price could be over 10 pounds (1,000 pence) in due course."

Analysts said it was likely that Cadbury shareholders would follow Carr's advice, despite earlier suggestions that they'd hold out for a higher offer.

David Cumming, head of U.K. equities at Cadbury shareholder Standard Life, had said Monday that Kraft needed to aim above 900 pence to secure support from long-term shareholders. But on Tuesday, he signaled the fight was over.

"I probably won't go against the view of Cadbury's management," he told the BBC. "Kraft are getting a good deal. It's sad that Cadbury is gone, but business is business."

The U.K. Takeover Panel has set a deadline of Feb. 2 for acceptances.

There was also declining speculation about a rival offer after Ferrero and Nestle dropped out of the race, leaving just The Hershey Co. as a contender to meet a British regulatory deadline of 7 a.m. (0200 GMT) Monday to make a bid.

"The likelihood of Hershey throwing its hat into the ring looks remote, given the required level of debt which the group would have to support," said Keith Bowman, Equity Analyst at Hargreaves Lansdown Stockbrokers.

Kraft said it did not plan full dual listings for the combined company in New York and London, but it would retain a secondary listing for British investors to trade their shares in Europe.

alpine village: german acrobats and chocolate

a little road trip to the queen mary today ended up with an accidental diversion to alpine village in torrance. it is definitely an "only in LA" wonder: there is an old fashioned meat counter where you can buy homemade sausage; their sunday german champagne brunch buffet is straight from the 60s; the ratio of socks in birkenstocks to vans is unusually high south of berkeley; entertainment is provided by cherub cheeked german octogenarians doing acrobats with flowers in their hair;

photo credit: james paris
and, you can find an amazing selection of chocolates at unusually low prices - - - heilemann chocolates are just 1.25!!!!!!!!

alpine village may not still look like the pictured vintage postcard but you must make the trip if you are a fan of camp and excellent prices on chocolate.

note: don't forget to put on your lederhosen... this years oktoberfest will be held September 12th, 2009 thru October 25th, 2009. www.alpinevillage.net

cadbury recalls 11 products from sale in china as tainted milk scandal grows

your chocolate should only list a few ingredients on the back (cacao beans, sugar, cocoa butter, pure cane sugar, and vanilla) and it definitely should not include melamine. read your labels very carefully and buy your chocolate from artisans and countries that have a history of producing quality products.

ben steele and agencies guardian.co.uk, monday september 29 2008 11:14 bst article history


the british chocolate maker cadbury today said it was recalling 11 product ranges from sale in china as the country's tainted milk scandal continued to grow.

the withdrawals come over fears that the products could contain the chemical melamine, which can cause kidney stones and lead to kidney failure.

contaminated milk products have killed four chinese babies and made tens of thousands of others ill. melamine can be added to milk to hide the fact that it has been watered down.

in a statement, cadbury said tests carried out on the chocolates had "cast doubt on the integrity of a range of our products manufactured in china".

it is not yet clear whether the tests revealed melamine, and the company said products on sale in the uk were not affected.

the recalled products – which include eclairs and dairy milk – were manufactured in the chinese capital beijing and sold in mainland china, hong kong and taiwan. one product was also exported to australia.

"we believe it is appropriate to take a precautionary step to withdraw from the market all of our cadbury chocolate products that have been manufactured in beijing, pending further supply of fresh products," the cadbury statement said.

hong kong's centre for food safety appealed to people to "stop consuming the chocolate products concerned", adding: "we would alert the trade to stop selling the affected products."

two us manufacturers are already investigating indonesian claims that high traces of melamine were found in oreo wafers, m&ms and snickers imported from china.

the indonesian food and drug monitoring agency said a dozen allegedly tainted products distributed nationwide, including those brands, had repeatedly tested positive last week.

kraft foods and mars said they were adhering to a recall order, but stressed that the same products had been cleared of melamine in other asian countries. the eu has banned all imported baby food from china.