British confectioner Cadbury has agreed to a takeover from US food giant Kraft worth $11.5 billion, the two companies said today.
The new firm will provide large cost savings and create a global market leader in food and confectionery, with annual sales totalling more than $100m, they added.
'The board of Kraft Foods is pleased to announce the detailed terms of a recommended final offer for Cadbury and the board of Cadbury unanimously recommends Cadbury security holders to accept the terms,' a statement said.
News of a friendly takeover marks the end of a bitter war of words over control of Cadbury, which began life as a small grocer's shop in Birmingham, central England, in 1824.
The takeover will end more than 180 years of history for the colourful maker of Dairy Milk chocolate bars and Cadbury Creme Eggs. Kraft's previous cash-and-shares offer had valued the iconic British firm at about £10.5 billion.
'Kraft Foods believes a combination with Cadbury will provide the potential for meaningful cost savings and revenue synergies from which Cadbury securityholders will benefit,' the statement added.
'Kraft Foods believes a combination represents a strong and complementary strategic fit, creating a global confectionery leader with a portfolio of more than 40 confectionery brands each with annual sales in excess of $100m,' it added.
Prior to today's bid, Cadbury had repeatedly rejected the previous offer from Kraft, arguing that it was 'derisory' and had undervalued the London-listed firm.
However, the chocolate firm welcomed news of the improved takeover bid today. 'We believe the offer represents good value for Cadbury shareholders and are pleased with the commitment that Kraft Foods has made to our heritage, values and people throughout the world,' Chairman Roger Carr said.
'We will now work with the Kraft Foods' management to ensure the continued success and growth of the business for the benefit of our customers, consumers and employees,' he added.
Cadbury, the world's second biggest confectionery company behind Mars, also produces chocolate bar brands Crunchie, Fudge, Flake and Wispa. It now employs 45,000 staff in 60 countries, including over 1,200 Ireland.
Cadbury sells more than 250 million bars every year in 33 countries around the world.
Kraft, the world's second biggest snacks group after Nestle, makes numerous well-known products including Dairylea cheese, Milka and Toblerone chocolate and Oreo cookies.
Cadbury shares valued at 840 pence sterling
The US firm proposes to pay 500 pence in cash and 0.1874 new Kraft Foods shares per Cadbury share. That would value each Cadbury share at 840 pence or about $11.5 billion.
'In addition, Cadbury shareholders will be entitled to receive 10 pence per Cadbury share by way of a special dividend following the date on which the final offer becomes or is declared unconditional,' the statement added.
'This recommended offer represents a compelling opportunity for Cadbury shareholders, providing both immediate value certainty and upside potential in the combined company,' Kraft boss Irene Rosenfeld said today.
'For Kraft Foods shareholders it transforms the portfolio, accelerates long-term growth and delivers highly attractive returns, while maintaining financial discipline.'
The friendly takeover deal comes after months of hostility between the two groups. Kraft had made a £10.2 billion offer for Cadbury back in September 2009. However, Cadbury, led by American chief executive Todd Stitzer, rejected the bid, saying that it 'fundamentally undervalued' the group.
Cadbury insisted recently that its 2009 performance was 'outstanding' - a claim which was dismissed by Kraft as 'underwhelming'. But the US firm has subsequently improved the offer after selling its North American pizza division to Swiss rival Nestle for $3.7 billion.
The Kraft tie-up also faced opposition in Britain with protest from senior ministers over the attempt by a huge American firm to take over a homegrown company. There have also been fears about British job losses, with trade union Unite warning Kraft would be saddled with huge debts.
Meanwhile, US chocolate maker Hershey had also been considering a counter-offer for Cadbury, the Wall Street Journal reported last week, adding that it planned to bid at least $17.9 billion.
'Sad day for Irish manufacturing'
The UNITE union at Cadbury's Irish operations says the successful bid by Kraft is 'a very sad day for Irish manufacturing and a great traditional company'.
Cadbury's has had manufacturing operations in Ireland for over 75 years and currently employs over 1,200 workers at three plants in Coolock and Tallaght in Dublin and Rathmore in Co Kerry.
The Coolock plant makes Dairy Milk, Flake Twirl, Time Out and other brands on sale in the Irish market. Rathmore makes chocolate crumb for use in the Irish manufacturing process and Tallaght makes gum base material for the company's European manufacturing plants.
'We have very real fears about how Kraft will repay its debt, particularly as it has ratcheted it up still further in order to purchase Cadbury,' commented Jimmy Whelan, the European co-ordinator for UNITE members in the Cadbury workforce.
'Whatever good intentions Kraft have towards Cadbury's workforce, the sad truth is there will be an irresistible imperative to pay down their debt, and this raises real fears for jobs and investment in this country,' he added.
The union is seeking urgent meetings with the senior management of both Cadbury and Kraft which will look for guarantees over jobs and sites in Ireland and the UK.
Find out how the Cadbury share price is performing on the London Stock Exchange here
