Cadbury makes case against Kraft takeover bid

LONDON — British candy maker Cadbury PLC on Tuesday stepped up its defense against a hostile takeover bid from Kraft Foods Inc. by announcing that full-year results will beat market expectations and pledging a 10 percent hike in dividend payments.

Cadbury said Kraft's 10.3 billion pound ($16.5 billion) bid was too low and that the share portion of the offer was unappealing because of the U.S. company's "poor track record of delivery."

"Don't let Kraft steal your company with its derisory offer," Cadbury chairman Roger Carr said to shareholders.

Cadbury shares fell slightly following the announcement, but market analysts remained convinced that Kraft's bid would fail unless it increases a cash and shares offer which now values Cadbury at 10.8 billion pound ($17.4 billion).

Shares in the British company were down 0.6 percent at 776.5 pence at midday on the London Stock Exchange, compared to Kraft's offer of 763 pence per share.

"We continue to think that Kraft will need to come up with an offer north of (800 pence) and with a significantly enhanced cash component to take out Cadbury," said Martin Deboo, analyst at Investec Securities.

Kraft is also under pressure from its biggest shareholder, billionaire investor Warren Buffett, not to sweeten its offer with more shares, which he believes are undervalued.

Time is running short: Kraft has until Jan. 19 to raise its offer, and the deadline for winning acceptances from a majority of Cadbury shareholders is Feb. 2.

Cadbury plans to release a preliminary report of its 2009 earnings on Thursday in hopes of convincing shareholders not to take up Kraft's current offer.

Kraft, whose products include Velveeta cheese and Oreo cookies, is "an unfocused, conglomerate business model with significant exposure to lower growth categories and a track record of missed financial targets," Cadbury said.

The maker of Dairy Milk chocolate and Dentyne gum, Cadbury said it would pay dividends totaling 18 pence per share for 2009, a 10 percent increase from 2008.

It said it expected to report a 5 percent growth in business revenue for 2009, or 11 percent higher on an actual currency basis. It said it had improved its trading margin by 1.55 percentage points to 13.5 percent.