LONDON Cadbury shares dipped below Kraft Foods Inc's 10.6 billion-pound ($17 billion) bid price for the first time on Thursday as prospects of a rival offer receded.
Kraft will not have to offer much more than 800 pence a share for Cadbury, analysts said, after shares in the British confectioner hit a day's low of 766-1/2p, compared with the current value of 768p for Kraft's cash and shares bid. Cadbury shares closed up 0.6 percent at 774p.
"We continue to believe Kraft will have to come up with a bid of over 800p for Cadbury to fold," said Investec Securities analyst Martin Deboo.
Cadbury shareholders still saw Kraft's current bid as unacceptable but appear to have veered away from higher expectations of an offer in the range of 820p to 850p.
"Anything under 800 pence will be horrible. I don't think Kraft will walk away - I think they will put their cards on the table and see what happens," said one top 30 Cadbury investor.
Cadbury board members have sought to encourage a possible rival offer from Hershey Co, sources familiar with the discussions told Reuters on Wednesday. But Cadbury said it was not looking for a white knight bidder, and analysts continued to question how Hershey could finance a deal.
NESTLE SEES SMALL CANDY DEALS
Another potential rival, Nestle, ruled out participating in a Cadbury bid. The decision this week by the Swiss food giant also lessens the chance of a Hershey bid as the two were viewed as potential partners in buying Cadbury assets.
Nestle Chief Financial Officer Jim Singh said on Thursday the company had sufficient scale in the confectionery business and expected to make only small acquisitions in that sector.
Kraft's chances of winning a deal have also been boosted in recent days by a rise in its own share price, which has in turn raised the value of its cash-and-shares offer for Cadbury.
Kraft raised the cash element of its bid on Tuesday and made a corresponding cut in the stock element. But within hours, Kraft's largest investor, Warren Buffett, warned the U.S. group not to overpay by relying on a large issue of new Kraft shares.
Kraft shares rose on Buffett's warning and on the prospect that, in the end, it won't seal a deal. The shares closed on Wednesday at $28.97, above the $28.10 they fetched just before the bid was announced in early September. They stood at $28.74 Thursday afternoon.
The U.S. food group said on Wednesday it had a 1.52 percent take-up from Cadbury shareholders. The bid remains open until February 2, and many Cadbury investors still hope Kraft will improve its bid terms by a UK Takeover Panel deadline of January 19.
Cadbury outlined the timing for the publication of its final defense documents against the Kraft bid on Thursday, saying it will publish new financial information on January 12 such as forecasts of its 2009 results and outlook for 2010.
The group has also been allowed by the UK Takeover Panel to give more details of its 2009 performance after the UK stock market closes at 1630 GMT on January 14.
(Additional reporting by Raji Menon and Emma Thomasson, editing by Michele Gershberg and John Wallace)