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Cadbury defenders step up fight

Source: Reuters - Wed 13th Jan 2010

Business Secretary Peter Mandelson is expected to add his weight to union calls for Cadbury shareholders to resist Kraft Foods' bid, which got a boost from the withdrawal of a possible rival.

As sources said Italian chocolatier Ferrero had pulled out of the race, Mandelson called a group of institutional investors to meet him to discuss their role in takeovers on Thursday, and Kraft's offer for Cadbury looks likely to top his agenda.

And with Kraft CEO Irene Rosenfeld set to meet a number of key Cadbury shareholders on Wednesday, according to sources, the Unite trade union warned of massive job cuts and "unacceptable risks" if she gets her way.

Ferrero's withdrawal leaves only Hershey Co as a possible rival to Kraft's 10.5 billion pound hostile bid, but analysts said the U.S. chocolate maker would struggle to finance a bid to take over the larger Cadbury on its own.

For four months Cadbury has been trying to fend off cheese and cookie maker Kraft's cash and shares bid, currently worth 766 pence a Cadbury share, and analysts and investors say Kraft must offer more to overcome the Dairy Milk chocolate maker's defences.

"Ferrero's withdrawal of its interest clears the field for Kraft, but we still expect Kraft to have to pay over 800p to win Cadbury" said one analyst.

Cadbury shares were up 0.5 percent at 780p by 12:30 p.m..

Analysts said Mandelson has been vocal in support of Cadbury, but he has no statutory powers to block the bid.

"If you think that you can come here and make a fast buck, you will find that you face huge opposition from the local population ... and from the British government" Mandelson said last month referring to Kraft's bid for Cadbury. 

Unite, Britain's biggest trade union, said in a briefing note that nearly 30,000 jobs were at risk if the debt-laden Kraft wins, and urged Cadbury investors to put the wider public interest ahead of price.

It argues that Kraft's ownership of Cadbury could put at risk 7,000 jobs directly and at least 20,000 more in the supply chain, and says Kraft has declined to give any assurances over jobs and investment.

"Cadbury has clearly demonstrated its strength as a stand alone company. Contrast that with Kraft's excessive debt, underperformance and the unacceptable risks this brings for Cadbury, and it is hard to see any wisdom in this bid whatsoever" said Unite spokeswoman Jennie Formby.

Earlier this week, the union gave evidence to Parliament's Select Committee on Business and Innovation, which is looking at the questions the bid for Cadbury poses for UK corporate governance and investor practices.

Cadbury, which also makes Trident gum, has said Kraft's "derisory" offer values it below that of any comparable deal in the sector. On Tuesday it reported robust 2009 results and said its momentum had continued into 2010.

Kraft, meanwhile, raised its 2009 profit forecast on Tuesday and said it was well positioned for "sustainable top-tier performance, with or without Cadbury."

Cadbury can still give more details on its 2009 results after Britain's stock market closes on January 14, while Kraft has until January 19 to raise it bid, and Cadbury investors have until February 2 to respond to Kraft's offer.

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