Kraft Foods sweetened its $16.4 billion (Dh60.1bn) hostile offer for Cadbury with cash, which may well be enough to land the British group, as long as rivals stay out of the race.
The US food group said it would sell its North American pizza unit to Swiss food giant Nestle and use the $3.7bn proceeds to fund a partial cash alternative for Cadbury shareholders. It will raise the cash portion of the deal by 60 pence a share, but keep the overall size of the offer unchanged.
Bankers and analysts had expected Kraft to raise its cash-and-share offer, which was also helped by a near four per cent rise in the value of its shares in just over a month.
Kraft's said it would give details of the alternative offer by January 19, the last day it can amend terms under UK takeover rules.
Nestle yesterday ruled out making or participating in any formal bid for Cadbury, but potential rival bidders Hershey and Ferrero have said they are looking at Cadbury and have yet to clarify their intentions.
Here are some possible scenarios for the takeover saga over the coming weeks.
Bankers and investors said it was "a given" that Kraft needed to improve its offer if it wants to win the support of more than 50 per cent of Cadbury shareholders by February 2, the final date in the 60-day takeover process.
"The extra cash component certainly puts Kraft in a stronger position," said a New York-based hedge fund that holds Cadbury shares.
Cadbury appeals to Kraft because confectionery is a higher-margin, faster-growing business than some of Kraft's packaged food lines such as cheese.
Cadbury would also help expand Kraft's business into faster-growing markets such as India.
Cadbury has been given three extra days to January 15 to come up with a 2009 trading update that could become a key plank in its defence.
Anything else it has to say to fend off Kraft needs to be out before January 12.
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