Kraft is in talks to sell Maxwell House coffee to Sara Lee, which would give Kraft enough cash to sweeten its bid for Cadbury, said a source closely following the situation.
Kraft said it would not comment on speculation.
“The Kraft proposal for Cadbury does not require divestitures and the company is comfortable in its ability to finance the transaction,” spokesman Steve Lipin said.
Kraft, multiple sources said, is close to raising $9 billion in financing so it can make a formal offer for Cadbury by the Nov. 9 deadline set by the British Takeover Panel. That is enough for it to make good on the hostile $16 billion stock and cash proposal it made last month, but not enough to raise the stakes.
Cadbury’s shares are now trading more than five percent above the proposed price, and Cadbury believes its shareholders would reject the current offer, several sources close to the process said.
Kraft will not consider borrowing more as that would risk its investment credit rating, several sources said.
Steve Ketterling, a portfolio manager at Sara Lee shareholder Stockman Asset Management, said the Maxwell House move would be in line with Sara Lee’s stated strategy. The company owns an international coffee business whose earnings have increased 16 percent in the past two years.
Sara Lee also has the money to buy what many consider a non-core Kraft asset.
In late September Sara Lee agreed to sell its European personal care business for $2 billion to Unilever. Sara Lee is also in the process of selling its European hair care and insecticide units.
Proceeds from the sales leave enough to pay several billion for Maxwell House, even after subtracting $1 billion Sara Lee said it will use to buy back shares.
Kraft has nine banks raising roughly $1 billion each for the Cadbury bid. It told lenders last week that they must commit to the financing and not join any other side in the process, a source close to the situation said.
The move helps ensure that there are no rival bids.