Zurich: Swiss food giant Nestle bit off a big slice of the huge pizza market in North America on Tuesday, announcing the purchase of Kraft Foods` pizza business for 3.7 billion dollars (2.5 billion euros).
Kraft said it would use the entire proceeds from the deal to improve its bid for Cadbury, the British confectionary business which has consistently fended off its suitor.
Nestle, cash rich and takeover hungry, meanwhile said it was not in the running for Cadbury, quashing rumours it could after Monday`s massive 40 billion dollar deal to sell its Alcon eye care operation to pharma giant Novartis.
Meanwhile Cadbury, famous for its chocolate bars, said it saw no improvement in Kraft`s bid which values the company at around 16 billion dollars.
"Kraft has once again missed the point. Despite this tinkering, the Kraft offer remains unchanged and derisory, with less than half the consideration in cash," a Cadbury spokesman said.
In a twist to events, billionaire investor Warren Buffett`s holding company Berkshire Hathaway said Tuesday that it opposed a plan by Kraft to raise the cash needed to buy Cadbury via a new share issue.
Berkshire Hathaway, which said it is likely the largest shareholder in Kraft with a stake of 9.4 percent, said it had voted "No" on Kraft`s proposal to authorise the issuance of up to 370 million shares to fund the acquisition.
Under its revised bid, Kraft offered Cadbury shareholders an additional partial cash alternative of 60 pence per Cadbury share, in place of some of the new Kraft Foods shares that they would have otherwise received.
The original bid by Kraft included 300 pence in cash and 0.2589 new Kraft Foods shares, valuing Cadbury at about 10.2 billion pounds.
However, the value has since fallen to around 9.9 billion pounds (11 billion euros, 16.1 billion dollars) due to a drop in Kraft`s share price and a weakening US dollar.
Explaining its revised offer, Kraft said it was a response to "the desire expressed by some Cadbury security holders to have a greater proportion of the offer in cash and because Kraft Foods shareholders have expressed a desire for Kraft Foods to be more sparing in its use of undervalued Kraft Foods shares as currency for the offer."
The US group said it believed its share price has been depressed due to short term factors which would dissipate once the uncertainty surrounding its offer for Cadbury is resolved.
Meanwhile, Nestle`s stand on Cadbury means that it would have "enough firepower to do further acquisitions," said Bank Vontobel analyst Claudia Lenz.
Buying Kraft`s frozen pizza business should boost the group`s frozen food business in North America, Lenz said, making a point taken up by Nestle chief Paul Bulcke.
"This frozen pizza business greatly enhances Nestle`s frozen food activities in North America, bringing together a selection of great US and Canadian brands, industry-leading R&D (Research and Development) and excellent route-to-market capabilities, which complement our existing ice cream direct-store-delivery," Bulcke said.
"With total sales of around three billion (Swiss francs), Nestle will become the world leader in the attractive, fast-growing frozen pizza category," he added.
The United States is the biggest pizza market in the world with sales of about 37 billion dollars, Nestle said in a statement.
With estimated sales of 2.1 billion dollars in 2009, Kraft Foods was the leader in the frozen pizza category and had enjoyed double-digit growth in the US and Canada over the last four years, it added.
Analysts from Bank Wegelin viewed the purchase as a positive move for Nestle.
"This pizza deal will not kill investors` appetite (for the stock) as the frozen food sector is taking on an immensely important role in today`s society," it said.