Ferrero, Hershey mull Cadbury bid, Kraft seen ahead
Written on November 19, 2009
Italy’s Ferrero and U.S.-based Hershey Co are considering a bid for chocolatier Cadbury Plc, but hostile bidder Kraft Foods Inc is still seen as the front-runner with its $16.8 billion offer.
Hershey and family-owned Ferrero, the maker of Nutella chocolate spread, both said separately on Wednesday they were reviewing a possible bid but gave no assurance that they would make a proposal for the British confectioner.
The two were asked by the UK Takeover Panel to clarify their intentions after Reuters and other media reported that they were discussing a joint bid, news which pushed Cadbury’s shares to their highest level in nearly a month.
Cadbury said it would give proper consideration to “any serious offer that delivers full value for the company,” but stressed it has yet to receive such a bid. Cadbury has dismissed Kraft’s offer as “derisory.”
The Ferrero and Hershey statements gave no hint that they might be working together on a joint bid. Analysts and investors doubt the two could rival the hostile cash-and-share offer from Kraft, though Cadbury could use interest from Hershey and Ferrero to extract a higher bid from Kraft.
“What it means for Kraft is if they are going to want to sign, seal and deliver this, they are going to have to up their bid,” said Edward Jones analyst Jack Russo.
Investors also expressed doubts.
“It’s a very long shot, and we would be very surprised if they got involved,” said one top-10 Cadbury investor speaking on condition of anonymity, referring to Hershey and Ferrero loan till payday.
A Kraft spokeswoman said the Oreo cookie and Velveeta cheese maker stood by its own offer on Wednesday, but declined to comment further on the company’s strategy. Chief Executive Irene Rosenfeld had so far succeeded in lowering Cadbury investors’ hopes for a big sweetener to the deal.
“We remain confident that we are absolutely the best, most logical partner for Cadbury,” spokeswoman Perry Yeatman said.
Cadbury shares rose above 800 pence for the first time in almost a month to a high of 802-1/2p before easing to 798.5p, up 1.3 percent, in London dealings. The shares traded at more than a 10 percent premium to Kraft’s offer, which currently values Cadbury shares at 721p.
On the New York Stock Exchange, Kraft shares were down 0.6 percent at $27.47 and Hershey shares were down almost 1.2 percent at $37.96.
For a graphic comparing Cadbury, Kraft and Hershey, click: http:/graphics.thomsonreuters.com/119/EZ_CDKFHS1109.gif
KRAFT COULD BATTLE WITH FORMER EXECUTIVE
The cost to protect Hershey’s debt with credit default swaps doubled on Wednesday after reports of a possible bid.
Filed in: management.