FINANCIAL TIMES: Lombard Live: Exchanging pizza for chocolate

Paid for with pizza. That could be Cadbury’s epitaph if the UK confectioner succumbs to Kraft’s hostile bid.

The US group’s sale of its substantial North American pizza business to Nestlé for $3.7bn, allows Kraft to plough $1.3bn into improving the proportion of cash in its offer for Cadbury. But unless the value of the whole bid is increased, this is rather like putting more mozzarella on your 12-inch margherita: it may make the pie more attractive to cheese-lovers, but it doesn’t (yet) increase the diameter.

If you’re a flag-waving Cadbury loyalist, of course, it makes no difference. The Kraft offer remains anathema.

But less committed Cadbury investors also have reason to pause before January 19, the last date Kraft can amend its bid terms, and consider the consequences of the US bidder’s latest move, and the implications of Warren Buffett’s worries about Kraft’s determination to issue shares.

Institutional and private shareholders will have the option to receive more cash as a proportion of the offer, it’s true. But the US group has sold one of the fastest-growing parts of its business. That ought to fuel two concerns with Cadbury shareholders. Kraft is already committed to spending an estimated $1.2bn in restructuring costs, in order to reap annual savings of $625m from a takeover. By definition, if Kraft has to increase its bid (with cash, to placate Mr Buffett) and make up for the loss of the pizza business, it will have to squeeze further savings out of the Cadbury combination.

Even if you dismiss concerns about Kraft’s commitment to preserving Cadbury’s culture, that raises a question of whether future savings are better milked by the UK group’s existing managers, with their focus on the confectionery business, or by their more thinly spread counterparts at Kraft.