Cadbury flakes in face of Kraft bid - cuts expected

Cadbury, the 186-year old chocolate maker, has given up the fight and accepted a hostile takeover bid from Kraft.

The two firms are still locked in final negotiations - an update given to the London Stock Exchange said they were finalising terms and that a further announcement will be issued shortly.

The offer is for 840p per share, a decent increase on Kraft's initial offer of 761p, the BBC reports. This offer values Cadbury at £11.7bn.

Kraft flogged off its North American pizza business to Nestle in early January for $3.7bn to help fund the bid for Cadbury. Despite this, the new firm will be laden with an estimated $22bn in debt and will be looking for job cuts and other cost cutting.

Unions fear the debt-burden state will push management into aggressive job cuts. Union Unite warned that Kraft cut 19,000 jobs between 2004 and 2008. It fears 7,000 direct jobs and 20,000 jobs at suppliers are at risk. IBM recently won an outsourcing contract for Kraft's HR processing.

The board accepted the deal in the face of pressure from major shareholders and hedge funds.

Cadbury employs 6,000 people in the UK and about 46,000 worldwide. The original business was a hot chocolate shop in 1824 in Birmingham's Bull Street.

Lord Mandelson held a meeting last week with major Cadbury investors to try and keep the Crunchie and Creme Egg maker in British hands. He apparently warned shareholders that he expected long-term commitments, not just short-term profit taking. We wish him luck with that.

But there are limits to what Mandy can do - after all, it's a chocolate maker, not a bankrupt bank which needs bailing out.

Kraft claims nine brands with revenues of over $1bn a year and 50 brands which bring in more than $100m a year. These include Maxwell House, Philadelphia cheese, Oreos and Milka chocolate. ®