Cadbury update
It has been another busy week for speculation regarding Cadbury and any potential bidders.
Cadbury shares dipped below the level of Kraft Foods’ $17 billion bid for the first time on Thursday as prospects of a rival bid receded and analysts reckoned Kraft now needs only to slightly sweeten its offer to win.
Kraft will not have to offer much more than 800 pence a share for Cadbury, analysts said, after shares in the British confectioner dipped 0.3% to 770p while Kraft’s cash and shares bid was valued at 771p a share.
Reports of a possible counterbid from Hershey were largely dismissed after Cadbury said it was not looking for a white knight bidder and analysts continued to doubt how Hershey could finance a deal.
With Kraft still the sole bidder its chances of winning the game have been boosted in recent days by a rise in its own share price, which has in turn raised the value of its current cash and shares offer. Kraft raised the cash element of its bid for Cadbury on Tuesday without changing the price by making a corresponding cut in the paper element, but within hours Kraft’s largest investor Warren Buffett warned the US group not to overpay and issue a large number of new Kraft shares.
“We are focused on delivering value to our shareholders and unless and until we have a credible offer that adequately reflects the strength of this business, there is nothing to comment upon,” Cadbury said in a statement late Wednesday.
Cadbury outlined the timing for the publication of its final defence documents against the Kraft bid, saying it will publish new financial information on 12 January such as forecasts of its 2009 results and outlook for 2010.
Meanwhile, Nestle has commented that it has sufficient scale in confectionery and only expected small buys, having ruled out rivalling Kraft Foods’ bid. Chief Financial Officer Jim Singh told a conference call, “We believe we have sufficient size and scale that will allow us to continue to complete regardless of what happens in our industry segment.”
Nestle effectively helped Kraft sweeten its hostile bid for Cadbury on Tuesday by buying its North American frozen pizza business for $3.7 billion (€2.58bn).
Singh declined to comment any further on that statement other than saying that Nestle only planned smaller, bolt-on deals in confectionery that were very geographically specific rather than targeting large global brands.
Analysts believe that despite likely continued speculation regarding Hershey’s interest in making a counterbid for Cadbury, Nestle’s decision effectively leaves Kraft as the overwhelming frontrunner. This was augmented following its decision to utilise all the net proceeds from the sale of its pizza operations to fund an additional partial cash alternative of 60p per Cadbury share, though this offer is not yet said to be final.
