LONDON — Kraft Foods Inc. improved its hostile takeover offer for British chocolate and gum maker Cadbury PLC after selling its North American pizza business for $3.7 billion to Nestle, which confirmed it would not make a rival bid.
Kraft said it will increase the proportion of cash in its offer after its deal with Nestle, which includes pizza brands such as Tombstone and Jack's in the U.S.
Nestle, which some had speculated could make a separate bid for the Cadbury, ruled itself out of any race to buy the U.K. company.
Cadbury shares were down 1.7 percent at 791.50 pence on the London Stock Exchange. Nestle share rose 1.5 percent to 50.95 Swiss francs.
Kraft, whose brands include Philadelphia cream cheese and Oreo cookies, extended the deadline for Cadbury shareholders to accept its offer to 1300 GMT on Feb. 2, and said it would update the market later Tuesday on the level of acceptances so far.
Nestle's brief statement left Kraft still the only declared bidder for Cadbury, though the British company says it has received expressions of interest from The Hershey Co. of the United States and Italy's Ferrero International SA.
Kraft, based in Northfield, Illinois, said it would use the proceeds from the pizza sale, estimated to be 60 pence per Cadbury share, to fund a partial cash alternative to its cash and shares offer worth 9.8 billion pounds ($16.3 billion).
"Kraft Foods is doing this because of 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," Kraft said.
"Kraft Foods continues to believe that its share price is depressed as a consequence of a number of short term factors which it believes will dissipate once the uncertainty surrounding its offer for Cadbury is resolved."
It promised to post details of the amended offer by Jan. 19, the last date for Kraft to revise its offer.
The pizza business bought by Nestle include the Tombstone and Jack's pizza brands in the U.S., the Delissio brand in Canada and the California Pizza Kitchen trademark license. It also includes two Wisconsin manufacturing facilities in Medford and Little Chute, Wisconsin.
Nestle said the acquisition will add a "new strategic pillar" to its frozen food portfolio in the U.S. and Canada, making it a significant player in the $37 billion a year pizza market. Nestle is already represented in the U.S. with brands such as Stouffer's, Lean Cuisine, Buitoni, Hot Pockets and Lean Pockets.
About 3,400 employees are expected to transfer to Nestle with the business to Nestle.
Speculation that Nestle might be gearing up for a Cadbury bid followed Monday's announcement that the Swiss company had agreed to sell its 52 percent stake in eye care unit Alcon for $28 billion to Swiss drug maker Novartis.(AP)