Cadbury responds to takeover talk

Posted by Daniel Palmer on 8th September 2009

British confectioner Cadbury has given no indication that they are looking for a tie-up in the wake of Kraft’s surprising A$19.5 billion bid.

The maker of Dairy Milk and Trident responded to Kraft’s announcement of a failed bid last night, confirming they had rejected the proposal on the basis that it “fundamentally undervalued” the firm.

“In response to the announcement by Kraft Foods, Cadbury confirms that it recently received an unsolicited proposal from Kraft Foods regarding a possible share and cash offer for the Group which is conditional on, inter alia, financing and due diligence. The Board of Cadbury reviewed the proposal with its advisers and rejected it,” the confectioner advised in a statement.

“The Board is confident in Cadbury’s standalone strategy and growth prospects as a result of its strong brands, unique category and geographic scope and the continued successful delivery of its Vision into Action plan. The Board believes that the proposal fundamentally undervalues the Group and its prospects.”

The proposal by Kraft was around 31 per cent above Cadbury’s closing price on Friday, but a 38 per cent rise in the confectioner’s share price last night suggests market players are betting on an improved offer from Kraft or a bidding war between some of the industry’s leading players.

The names Nestlé, Hershey and Mars have been mentioned as other possible suitors, although Mars, in particular, would appear very unlikely to make a deal for a company in which there is appears to be too much overlap in operations. Added to that is their multi-billion dollar purchase of Wrigley’s last year which ensures another major purchase would be unlikely in the near term. And then there is the competition issues…

Nestlé, meanwhile, sought to distance themselves from the speculation, with their CEO reiterating that they had no plans for a major acquisition in 2009 or 2010. Paul Bulcke did add, however, that they were “always open to opportunities” and refused to comment on the likelihood of a counterbid at this stage.

As for Hershey? … They are too small for a takeover on their own, but could potentially team with a major player to purchase the business via a break-up deal. As a result, analysts are suggesting a Nestlé-Hershey offer would be the most likely counterbid; if there is to be one.