Kraft to Acquire Cadbury in Deal Worth $19 Billion

After months of fiercely resisting any deal, Cadbury agreed on Tuesday to an improved takeover offer from Kraft Foods, worth about $19 billion.

For Kraft, the deal offers a chance to expand its footprint in emerging markets and in higher-growth sectors like gum and candy.

“It transforms the portfolio, accelerates long-term growth and delivers highly attractive returns,” Irene B. Rosenfeld, Kraft’s chairwoman and chief executive, said in a statement.

Cadbury for its part will benefit from the supply chain of a larger company, said Jon Cox, a food and beverage analyst at Kepler Capital Management in Zurich.

But the prospect of a takeover of Cadbury, the 186-year-old British company, especially by an American multinational like Kraft, sent shudders throughout Britain and prompted a wave of public protests.

The Mail on Sunday, one of the biggest-selling British newspapers, ran a “Keep Cadbury British” campaign.

“It’s sad to see another British company bought up by a multinational,” Mr. Cox said, “but that’s finance.”

Prime Minister Gordon Brown said Tuesday that his government was “determined that the levels of investment that take place in Cadbury in the United Kingdom are maintained,” and that “at a time when people are worried about their jobs, that jobs in Cadbury can be secure.”

During a conference call Tuesday, Kraft executives reiterated that the company would keep a strong presence in Britain and would be a “net importer” of jobs in the country.

The move will also continue the consolidation that has dominated the food business over the last decade.

While mergers involving food companies dipped somewhat last year — preliminary data from the Food Institute, a trade organization, showed 58 acquisitions in 2009, versus 130 in 2008 — analysts expect deal-making to pick up again as companies seek greater scale and presence in developing countries.

“We’re in the middle of a little wave of deal activity,” Greg Pearlman, the head of the food and consumer group at BMO Capital Markets, said. “Will they all be as big and global and transforming as this? No. But I do think there’s some pent-up demand for strategic acquisitions.”

That may present challenges for companies like Hershey that lack an international presence to pursue global competitors. Hershey, based in Pennsylvania, had been readying a potential bid for Cadbury, according to people briefed on the matter. Yet with Cadbury’s board recommending the new Kraft bid, a counteroffer from Hershey seems unlikely.

The agreement between Kraft and Cadbury came together over the weekend, after weeks of sometimes blistering volleys.

Cadbury in particular fought fiercely. Its chairman, Roger Carr, derided Kraft as showing “contempt” for the well-known brand and dismissed its hostile bidder as a low-growth conglomerate.

On Tuesday, Mr. Carr softened his language, saying in a joint statement that the new offer “represents good value for Cadbury shareholders.”

“For Cadbury shareholders, it’s the best possible deal, given they were dealt a bum hand, because there were no counterbidders,” Mr. Cox said. “The clear winner is Kraft.”

Kraft’s original, unsolicited offer, made in September, was worth about $16.7 billion.

The new offer is about a 5 percent premium over Cadbury’s closing share price of 807.5 pence on Monday and a 14 percent improvement over Kraft’s first offer in September.

Under the terms, Kraft will pay 500 pence in cash and offer 0.1874 new Kraft shares for each share of Cadbury. That amounts to a payment of 840 pence ($13.80) for each Cadbury share. Additionally, Cadbury will pay out a special dividend of 10 pence a share.

Tuesday was the last day Kraft could raise its offer under British takeover rules. Cadbury shareholders have until 1 p.m. London time on Feb. 2 to decide whether to accept it. While the terms of the offer are final, Kraft reserved the right to raise its bid if a rival offer were made.