LONDON - Kraft Foods sweetened its 10.2 billion pound ($16.43 billion) hostile offer for Cadbury with cash, which may well be enough to land the British group, as long as rivals stay out of the race.

The U.S. food group said it would sell its North American pizza unit to Swiss food giant Nestle and use the $3.7 billion proceeds to fund a partial cash alternative for Cadbury shareholders. It will raise the cash portion of the deal by 60 pence a share, but keep the overall size of the offer unchanged.

Bankers and analysts had expected Kraft to raise its cash- and-share offer, which was also helped by a near 4 percent rise in the value of its shares in just over a month.

Kraft's said it would give details of the alternative offer by January 19, the last day it can amend terms under UK takeover rules.

Nestle on Tuesday ruled out making or participating in any formal bid for Cadbury, but potential rival bidders Hershey and Ferrero have said they are looking at Cadbury and have yet to clarify their intentions.

Here are some possible scenarios for the takeover saga over the coming weeks.


Bankers and investors said it was a given that Kraft needed to improve its offer if it wants to win the support of more than 50 percent of Cadbury shareholders by February 2, the final date in the 60-day takeover process.

The extra cash component certainly puts Kraft in a stronger position, said a New York-based hedge fund that holds Cadbury shares.

Cadbury appeals to Kraft because confectionery is a higher- margin, faster-growing business than some of Kraft's packaged food lines such as cheese.

Cadbury would also help expand Kraft's business into faster-growing markets like India.


Cadbury has been given three extra days to January 15 to come up with a 2009 trading update that could become a key plank in its defense. Anything else it has to say to fend off Kraft needs to be out before January 12.

After that, the company is not allowed to give any new information, though it can still reiterate messages.

Analyst Jeremy Batstone-Carr at brokers Charles Stanley this week moved his recommendation on Cadbury shares to reduce as he expects the group to evade Kraft's clutches, with the 2009 numbers unlikely to disappoint.

Our reduce recommendation is predicated on the view that Cadbury will do enough to ensure sufficient shareholder support to see off its rivals, he said.

His assessment was partly based on strong anecdotal evidence suggesting robust Christmas-related shopping activity.

If Kraft fails to win over 50 percent of Cadbury shareholders, it must wait another year before bidding again, unless another offer emerges or Cadbury invites it back.


The two companies announced their interest in Cadbury in separate statements on November 18, though bankers say there are significant barriers that could prevent a rival offer.

Hershey and Italy's Ferrero have until January 23 (Day 50) to come up with a fully financed bid. As that is a Saturday, the deadline could be moved to January 22 or January 25.

If either of the groups come up with a firm bid, the takeover clock is reset and the suitor then has up to 28 days to come up with an offer document, and when that is posted it becomes Day 0 of a new 60-day takeover timetable.

If Hershey and Ferrero fail to come up with a fully financed offer, they will not be able to bid for another six months.

(Editing by Erica Billingham)