London, Nov 4 - U.S. food group Kraft will be willing to pay only 800 pence a share for Cadbury after Kraft's CEO cautioned on overpaying for the British confectionery group, Investec Securities said on Wednesday.
Kraft launched its cash-and-share offer in early September priced at 745p, or 10.2 billion pounds, which Cadbury rejected, while the value of the bid has slipped to 717p with the fall in Kraft shares and Cadbury shares traded at 766p by 1530 GMT.
"We now think Kraft will be willing to pay only 800p, and the probability of a successful bid falls accordingly," said analyst Martin Deboo at Investec Securities, one of the few big brokers not involved in advising or financing on the bid battle.
He said Kraft CEO Irene Rosenfeld signalled that she had a finite sense of what Cadbury is worth on a conference call following its third-quarter results late on Tuesday. Deboo had previously thought Kraft would be willing to pay up to 875p.
Deboo believes Kraft will be willing to pay more than its initial offer and says Cadbury is still a strategically highly attractive deal for it. His maximum 800p bid would be made up of 400p of cash, up from 300p of cash in the original bid.
He rates Cadbury's chances of remaining independent as high as 40 percent and puts a punchy standalone value on Cadbury's share at 750p. Relative to its pre-bid level of 568p, he says the stock market has risen and earnings updates have gone through supporting a re-rating which would support this value.
Kraft shares fell after disappointing investors with its third-quarter earnings late Tuesday and were last off 3.1 percent at $26.69.
Kraft has until 1700 GMT on Monday Nov. 9 to come up with a formal bid for Cadbury or walk away for six months under UK takeover rules.