Kraft Foods, Cadbury agree to $19.5 billion deal

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," Rosenfield 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.