Cadbury's spread to bid narrows on Buffett opposition

Cadbury Plc shares fell for a second day in London to trade less than 1 percent above the value of Kraft Foods Inc’s offer, the smallest spread since the US food maker’s initial approach on September 7.

Cadbury slid as much as 1.5 per cent, extending yesterday’s 3.2 per cent drop after Warren Buffett’s Berkshire Hathaway Inc went public with opposition to Kraft’s plan to issue new shares to fund its bid. Kraft shares rose 4.9 per cent in New York yesterday, increasing the value of its cash-and-stock offer to about 764 pence per Cadbury share.

Kraft has received acceptances from 1.5 per cent of Cadbury shareholders, the Oreos cookie-maker said today. Kraft yesterday pledged to use the net proceeds of its US pizza unit sale to Nestle SA to boost the cash component of the £10.9 billion ($17.5 billion) offer. Nestle ruled out bidding for Cadbury.

“A 900-pence plus bid is a fantasy now,” said Phil Spencer, who helps manage shares including Cadbury for private clients at Brewin Dolphin Ltd., which has £20 billion under management. “There’s a feeling of nervousness in the market that this is as good as it’s going to get. Clients are wondering if they should book some profits now rather see Kraft walk away and the shares fall to 700 pence.”

Cadbury has repeatedly called Kraft’s offer “derisory” and said it was “contemptuous” of the company’s inherent value. Kraft has maintained it will be “disciplined” on price and has been urged by Berkshire Hathaway, Kraft’s biggest investor, not to overpay by using too many of its own shares. The value of Kraft’s bid didn’t change with the higher cash component.

Cadbury was down 6.5 pence, or 0.8 per cent, to 772.5 pence as of 10:55 am local time. The spread between the shares and Kraft’s bid was 0.9 per cent at the same time.

Kraft said today the acceptances were received as of 1 pm UK time yesterday, the same day it extended the offer deadline.