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NEW YORK -- Nestle ruled itself out of a bidding war for Cadbury, as Kraft Foods Inc. sweetened its $16.4 billion offer for the English confectionery company.
At the same time, Kraft's biggest shareholder, Warren Buffett, warned Kraft executives not to overpay, according to a Reuters report. Buffett raised doubts about the success of Kraft's hostile bid.
Buffet's Berkshire Hathaway Inc owns 9.4 percent of Kraft; it voted "no" to Kraft's proposal to issue up to 370 million new Kraft shares to help fund a Cadbury takeover. The firm may change its vote if it concludes the offer does not destroy value for Kraft shareholders, Reuters reported.
Kraft upped its $16.4 billion proposal by adding 60 pence cash ($0.96) per share to the offer, but reduced the stock portion of the hostile bid.
The extra cash brings the cash portion to 360 ($5.77) pence and is funded from a recent deal whereby Nestle will buy Kraft's North American frozen pizza business for $3.7 billion, according to the report.
Cadbury renewed its rejection of the Kraft takeover bid.
"Nestle's decision effectively leaves Kraft as the overwhelming front-runner. Nestle's decision effectively removes Ferrero and Hershey from the field as competitive forces," analyst Jeremy Batstone-Carr at Charles Stanley told Reuters.
U.S.-based Hershey and Italy's Ferrero expressed interest in bidding for Cadbury in November but failed to generate fully financed bids by Jan. 23, required under British law. Some analysts had expected Nestle to team up with Hershey, while Ferrero was seen as needing financial help, according to the report.
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