Hershey must pay “great price” for Cadbury prize

Posted by Daniel Palmer on 15th January 2010

Hershey, the US chocolate maker rumoured to be preparing a solo bid for Cadbury, needs to pay a “serious price” to acquire the company, the UK confectioner’s chairman insisted today (14 January).

Roger Carr, speaking as Cadbury gave more details on its 2009 performance as the company fights a hostile takeover bid from Kraft Foods, said the Dairy Milk maker believes in its stature as an independent company but would consider offers that better matched the UK firm’s valuation of the business.

Carr has repeatedly labelled Kraft’s GBP10.5bn (US$17.15bn) cash-and-shares offer as “derisory” – an accusation he repeated this afternoon – and said any suitor would be bidding for a “great business delivering great growth”.

Hershey, which publicly declared its interest in Cadbury in November, has been linked with possible joint bids with Ferrero and Nestle.

The US group’s possible bid partners have appeared to have fallen by the wayside since the New Year. Last week, Nestle ruled itself out of the bidding for Cadbury, while this week, Ferrero was reported to have abandoned plans to move for the UK group.

Today, reports from the US have claimed that the Hershey Trust, the US firm’s controlling shareholder, had given the go-ahead for a bid ahead of the 23 January deadline – despite industry watchers claiming the company does not have the finances to move for Cadbury.

“This remains about value. Cadbury as an independent is very strong. We don’t need anybody; we have the strength to grow,” Carr insisted.

“For Hershey, the position would be a domestic business acquiring Cadbury, which would catapult it overnight into a world business. It’s an opportunity that has to be paid for. If Hershey buys us, it gets a great prize in being a world business. For a great prize, you have to pay a great price,” Carr said.

A combination between Cadbury and Hershey has been touted around the food industry for years. A deal between the two foundered in 2002 after the Hershey Trust – which owns a 30% equity stake in the company but 80% of the voting rights – refused to give up control of the US confectioner.

When asked whether Cadbury would seek a merger with Hershey, Carr indicated the UK firm would not be interested in such a transaction.

“We are here to create value – immediate and long term – for our shareholders. We have been put in a process by Kraft and, to exit that process, we will do so by either someone paying for the privilege of owning this company, which is tomorrow’s price today or by retaing our independent because our independent value exceeds anything that’s been in offered,” Carr said.

“We are not looking for other tactics. We are simply here for shareholder value. That’s where we draw the line in the sand.”

Industry analysts have regularly said Kraft needs to pay at least 800p per share to succeed in its pursuit for Cadbury. The US food giant’s offer currently values the company at 762p a share.

Cadbury’s shares closed up 1.2% at 799p.

just-food is the world’s leading portal for the global pre-packaged food and retail industries. Its daily mix of breaking news, views, analysis and research serves over 100,000 food executives each month. http://www.just-food.com/