Cadbury shareholders reject Kraft

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Cadbury shareholders have overwhelmingly rejected the initial hostile takeover offer from Kraft Food.

The US group said in a statement that it had gained support for its offer from investors holding just 1.5% of shares in the UK chocolate-maker.

Kraft had offered £3 plus 0.26 new Kraft shares for each Cadbury stock.

The US firm now has until until 19 January to announce a final, higher offer for Cadbury. If that is rejected, it will then have to wait another year.

Shareholder objection

Kraft's announcement came after one of its key shareholders revealed it had voted against the firm's plans to sell new shares to help fund the proposed Cadbury takeover.

KRAFT BID TIMELINE 7 Sep: Kraft tables offer for Cadbury, valuing the company at about £10bn. The bid is immediately rejected by the Cadbury board 9 Nov: Kraft goes hostile with its takeover bid, and Cadbury again rejects the offer4 Dec: Kraft details offer aimed at Cadbury shareholders, setting 5 January deadline14 Dec: Cadbury publishes its defence document, urging its shareholders to reject the Kraft offer31 Dec: Deadline for shareholders to accept the Kraft bid is extended to 2 February5 Jan: Kraft announces revised offer with higher cash proportion6 Jan: Kraft reveals that its initial offer for Cadbury has gained support from investors holding just 1.5% of Cadbury shares15 Jan: Deadline for Cadbury to issue trading update 19 Jan: Deadline for Kraft to publish details of revised offer2 Feb: Deadline for Cadbury shareholders to accept Kraft bid <a class="" href="http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/shares/3/87086/intraday.stm">See Cadbury's share price</a>

Berkshire Hathaway, the holding firm of US billionaire Warren Buffett, said it was concerned that the share sale would have wrongly given Kraft a blank cheque, allowing it to change its offer "in any way it wishes".

However, Hathaway, which owns 9.4% of Kraft, said it might change its vote if the final bid "does not destroy value for Kraft shareholders".

BBC business editor Robert Peston said that, as a result, Kraft's plans to buy Cadbury were now in jeopardy.

Sweetened offer

On Tuesday, Kraft announced that it had sold its North American pizza business - which sells brands including DiGiorno and California Pizza Kitchen in the US and Canada - to Nestle for $3.7bn (£2.3bn).

It said it would use the money raised to increase the proportion of cash in its offer to Cadbury shareholders, in order to make its bid more attractive.

The sale means Kraft will be able to offer an extra 60p per share in cash, though the overall value of the offer is not being increased.

Cadbury's board said this revised offer also remained "derisory", and that it also expected this to be rejected by its shareholders, who have until 2 February to decide on any final offer from Kraft.

Swiss food giant Nestle, which owns best-selling chocolate brands including KitKat, has ruled itself out of trying to buy Cadbury.

That means Kraft remains the only current bidder for Cadbury, although US confectioner Hershey has previously expressed its interest in a possible bid.