October 22, 2009 11:33 pm

Peltz adds a twist to battle for Cadbury

A wild card is set to be thrown into the battle by Kraft to acquire UK confectionery group Cadbury with the expiry on Friday of an agreement by shareholder Nelson Peltz to refrain from publicly criticising the US food group.

Mr Peltz’s Trian fund management company – which holds stakes in Kraft and Cadbury – had struck a two-year “standstill” agreement with the US group in November 2007 not to criticise its “corporate strategy, business, corporate activities or management”.


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The deal followed Trian’s push behind the scenes for Irene Rosenfeld, Kraft’s chief executive, to think about divesting lower margin brands and expanding the group’s confectionery and biscuit business.

As part of the agreement, Kraft expanded its board with two additional independent directors supported by Trian: Frank Zarb, a managing director at Hellman & Friedman, the private equity investors, and Lois Juliber, a retired Colgate-Palmolive executive.

Kraft subsequently announced the sale of its Post cereals business to Ralcorp for $2.6bn and bought the LU biscuit business of France’s Danone for $7.2bn.

Both Kraft and Trian, which was founded in 2005 by Mr Peltz, Peter May and Ed Garden, declined to comment on the expiry of the agreement.

Trian had not commented on Kraft’s takeover approach for Cadbury, but it would fit with the fund management vehicle’s support for margin-boosting acquisitions.

The agreement with Kraft also was signed at a time when Trian was stepping up a campaign in the UK for Cadbury to improve its margins or risk becoming a takeover target.

Trian held a 0.65 per cent stake in Kraft at the end of June and currently has a 3 per cent holding in Cadbury.

Kraft, which outlined a $10bn cash-and-shares potential offer for Cadbury last month, was required by UK regulators to make a formal offer by November 9.

The group has said it can fund its offer without making disposals.

Speculation over potential future sales by Kraft has focused on its Maxwell House coffee, Oscar Mayer meats and cheese businesses.

Kraft reports its third-quarter results on November 3.

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