Nestle Move Could Seal Cadbury's Fate

Yesterday Nestle was sitting on a pile of cash, thanks to its sale of eye-care group Alcon, and the loudest rumor going around was that the company would use that money for its own bid on Cadbury.

Instead Nestle chose to more or less guarantee that Kraft would stand alone. In buying Kraft's frozen pizza business, Nestle not only handed Kraft the cash it needed to raise its own offer, but it significantly reduced the chances that anyone else will enter the game. Hershey has been contemplating its own Cadbury bid, but the expectation was that it would need to team up with Nestle to afford it. Ferrero, the other possible candidate, is similarly unlikely to go it alone.

Of course, Kraft didn't actually raise its bid -- it just altered the composition, offering a bit more cash instead of stock. Cadbury said the move amounted to meaningless "tinkering" and insisted the offer was still "derisory."

Kraft still has until Jan. 19 to raise its offer, and a last minute change would not be surprising. But Kraft's top stockholder, Berkshire Hathaway Inc., has warned the company against paying too much, and it voted against Kraft's proposal to fund the bid by issuing up to 370 new shares.

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• Cadbury Playing Hard-to-Get?