The US food giant Kraft Foods has said it will increase its bid for UK confectionery firm Cadbury following the sale of its US and Canadian frozen pizza operations to SwitzerlandÔÇÖs Nestl├® for the sum of $3.7 billion (┬ú2.3 billion).
Northfield, Illinois-based Kraft said it will use the funds from the sale to up its Cadbury offer by 60 pence a share.
In a statement, the company said: ÔÇ£Kraft Foods is doing this because of the desire expressed by some Cadbury securityholders to have a greater proportion of the offer in cash and because Kraft Foods shareholders have expressed a desire for Kraft Foods to be more sparing in its use of undervalued Kraft Foods shares as currency for the offer.ÔÇØ
The statement continued: ÔÇ£Kraft Foods continues to believe that its share price is depressed as a consequence of a number of short term factors which it believes will dissipate once the uncertainty surrounding its offer for Cadbury is resolved.ÔÇØ
The frozen pizza market in the US is the largest in the world, with sales of around $37 billion (┬ú23 billion). Vevey, Switzerland-based Nestl├® is expanding its food business in North America after deciding against a bid for Cadbury.
KraftÔÇÖs frozen pizza brands include DiGiorno, Tombstone and California Pizza Kitchen, as well as Delissio, the leading frozen pizza brand in Canada.
With sales of around $2.1 billion (£1.3 billion) in 2009, Kraft Foods is the leader in the frozen pizza category, achieving double-digit growth in the US and Canada over the last four years.
Commenting on the purchase, Paul Bulcke, CEO of Nestl├®, said: "This frozen pizza business greatly enhances Nestl├®'s frozen food activities in North America, bringing together a selection of great US and Canadian brands, industry-leading R&D and excellent route-to-market capabilities, which complement our existing ice cream direct-store-delivery.
ÔÇ£With total sales of around CHF3 billion, Nestl├® will become the world leader in the attractive, fast-growing frozen pizza category."
The unit will become part of Nestl├®ÔÇÖs US operations, headquartered in Glendale, California.
Brad Alford, chairman and CEO of Nestl├® USA, said: "Our combined capabilities in direct-store-delivery, R&D, innovation and commitment to quality, taste and convenience make this a good strategic fit with our frozen food portfolio."
Following discussions with the UK Takeover Panel regarding the potential for further speculation over a bid for Cadbury, Nestl├® announced: ÔÇ£Nestl├® confirms that it does not intend to make, or participate in, a formal offer for Cadbury.ÔÇØ
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