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Cadbury takeover set to become bitter

While privately it is rumoured that many Cadbury directors believe that Kraft foods will not walk away from a potential deal in the short term, the takeover battle between these two giants is set to become bitter over the next few weeks. Today we saw Cadbury's request clarification from banking giant Merrill Lynch which had apparently indicated that the chief executive of Cadbury had suggested that a fair takeover price for the company would be around 15 times earnings before interest and depreciation.

This would indicate a takeover price in excess of £10 a share against the company's initial bid of around £7.45. However, Merrill Lynch has today confirmed that this was not an official confirmation of a "fair bid price" from Cadbury's, a move which would have been against the UK takeover code. As we covered yesterday, Cadburys has also asked the panel on takeovers and mergers to issue a "put up or shut up" deadline on Kraft Foods in order to bring the issue to a head in the short to medium term.

With the Cadbury share price higher than the initial £7.45 offer from Kraft Foods it seems almost inevitable that any takeover would be at a price in excess of this. Whether Kraft Foods comes back with a higher offer or we see the emergence of a "white knight" remains to be seen.

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