Cadbury Board urges shareholders not to let Kraft “steal” the confectioner

Posted by Daniel Palmer on 13th January 2010

In its second response statement to the Kraft takeover bid, confectioner Cadbury had continued to criticise the offer, arguing that it’s even more unattractive now than when it was made.

The UK-based firm, which is due to publish their latest trading statement on Friday, pointed to their results last year as a reason to dismiss the takeover proposal, with growth rates in the mid-single digits forecast to continue.

“Our performance in 2009 was outstanding,” Todd Stitzer, Cadbury’s CEO, proclaimed. “We generated good revenue growth despite the weakest economic conditions in 80 years. At the same time, our Vision into Action plan drove a 160 basis point improvement in margin to 13.5%, on an actual currency basis, delivering over 70% of our original target in half the time.

“Looking forward to 2010, we are targeting revenue growth within our 5-7% goal range, led by new product innovations across our categories and supported by incremental investment in marketing. We expect benefits from our restructuring and reconfiguration actions in 2010 to drive continued progress to achieve our targets of good mid-teens margin by 2011 and 16-18% margin by 2013.”

The maker of Dairy Milk suggested that the offer was an undervaluation compared to other comparable transactions in the industry and believed their upgraded forecasts, stronger than expected results and improving global economic conditions were enough to warrant a much more significant takeover premium.

“Kraft’s offer is even more unattractive today than it was when Kraft made its formal offer in December. (It) is very significantly below all comparable transactions in the sector; applying any of the comparable multiples would imply a price per share far above Kraft’s offer,” Cadbury Chairman, Roger Carr, explained.

“Our 2009 performance is ahead of our previously upgraded expectations and we have excellent momentum going into 2010.”

The confectioner also took the opportunity to criticise the performance of Kraft over recent years, arguing that they have “an unfocused, conglomerate business model with significant exposure to lower growth categories and a track record of missed financial targets.” As such, a scrip-cash deal providing exposure to Kraft stock was not considered ideal.

“Don’t let Kraft steal your company with its derisory offer,” Mr Carr urged.