A top shareholder in Cadbury said investors in the British confectionery firm would find it hard to turn down an offer of more than 8 pounds a share from U.S. suitor Kraft.
North American food giant Kraft has repeated the cash and shares terms of its original approach, which Cadbury rejected two months ago, and took its bid, which is 4 percent less at around 7.10 pounds after a fall in Kraft shares, directly to Cadbury shareholders.
The top 10 investor, who declined to be named, told Reuters on Monday: They need to raise the bid from here to be successful.
If there is 8 pounds ($13.42) plus on the table (per share), it is going to be difficult for Cadbury shareholders to walk away from that -- but that's not what's on the table at the moment, he said.
The Cadbury board is right in rejecting this offer, although the risk reward is looking less and less favourable for Cadbury, the shareholder said.
Another top 25 investor, who also declined to be named, said the bid would have to be higher.
I think something closer to 9 pounds -- not scraping over 8 pounds -- will have us scrambling for our calculators, he said.
Whilst it would be possibly unrealistic for Kraft to think that's what they want to pay, they also have to consider that it may be unrealistic that anyone is going to sell it to them at that price.
Kevin Dreyer, research analyst and associate portfolio manager at Gamco Asset Management, said Kraft's offer was low, given Cadbury's brands and growth prospects. Gamco owns just over 1 percent of Cadbury, mainly through American depository receipts (ADRs).
The current offer values Cadbury at 11.6 times 2009 EBITDA that multiple strikes me as relatively low as opposed to other confectionary acquisitions as well as some other acquisitions Kraft has done, he said.
(Editing by Karen Foster)