Officials at Kraft Foods Inc. promised to safeguard existing pension rights of Cadbury employees as part of Kraft's proposed acquisition, announced today.
The proposal, which follows a four-month battle triggered by a hostile bid in September, is valued at £11.9 billion ($19.5 billion) — about 14% higher than the initial offer — and includes a larger portion to be paid to shareholders in cash, according to documents released by Kraft.
Analysts estimate that the acquisition, if finalized, could mean an additional debt burden of about £7 billion for Kraft, which could be a point of concern for Cadbury pension trustees and the Pensions Regulator, which oversees Britain's occupational plans. The agency has the authority to issue a clearance statement on M&A transactions involving defined benefit funds, according to some pension consultants, although the pension trustees and the Pensions Regulator cannot legally block any deals.
However, trustees and the regulator can push for additional funding that could make potential deals more costly.
The £1.6 billion Cadbury Pension Fund, Bourneville, England, remains only one of three defined benefit plans among FTSE 100 companies still open to new members. Allan Whalley, head of group pensions at Cadbury, could not be reached by press time for comment. A spokeswoman for the Pensions Regulator declined to comment.
Hershey Co., which also considered bidding for Cadbury, has until Jan. 25 to submit a counteroffer. Cadbury shareholders have until 1 p.m. GMT Feb. 2 to accept the Kraft offer. Kraft shareholders will not get to vote on the proposed deal.
The Cadbury fund on Dec. 16 agreed to offload £500 million, or 25%, of its liabilities to insurer Pension Corp.