A Sweet Deal

With what looked like a classic hostile takeover battle looming, U.S. food giant Kraft Foods Inc. upped its bid for Cadbury enough to win the British confectioner’s board’s approval.

Kraft, after holding to an offer of about $16.5 billion since first making its play for Cadbury in September, upped the offer to about $19.5 billion. Cadbury board members and shareholders had insisted the original Kraft offer was too low, and there were rumors that other players such as Hershey might come riding in with a bid for Cadbury.

The deal will bring an end to the independence of the nearly 200-year-old confectioner. But sentimentality aside, it will also give Kraft increased access to fast-growing markets across the world, including India and Brazil.

Cadbury, the Wall Street Journal reports, is the biggest candy maker in markets like India, Mexico, Egypt and Thailand. Emerging markets represent about 38 percent of the company’s sales.

The deal, “transforms the portfolio, accelerates long-term growth and delivers highly attractive returns,” Irene Rosenfeld, chairman and chief executive of Kraft, said.

Kraft would love the increased penetration in those high-growth markets. But the deal is also risky. As the Journal points out, some of Kraft’s shareholders, including Warren Buffett, have warned the company management not to overpay for Cadbury.

The agreement is a 180-degree turn for Cadbury executives, who had derided Kraft’s previous bid as too low, and who have criticized Kraft’s management.