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Cadbury admits to rival interest as rejects Kraft
Source: Agencies |
December 14, 2009, Monday
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BRITAIN'S Cadbury Plc admitted to interest from other bidders after raising its growth targets and reporting upbeat trading as it dismissed a 10 billion pound (US$16.5 billion) bid from Kraft Foods.
The Dairy Milk chocolate maker today called Kraft's bid "wholly inadequate" kicking off a seven-week fight for its independence, while declining to name Hershey or Italy's Ferrero who have said they are contemplating bids for Cadbury.
"We have had indications of interest from third parties on possible business combinations," Chief Executive Todd Stitzer told a conference call after issuing its defense document.
Cadbury shares rose to an early high of 797-1/2 pence but last traded up 0.2 percent at 791p by 0815 GMT compared to Kraft's hostile bid worth 727p. Most analysts believe Kraft will need to pay 820p to 850p to win Cadbury.
Cadbury and US-based Hershey have held talks over a friendly bid by the US firm, according to the Sunday Telegraph, while Nestle is said by analysts to be watching events surrounding Cadbury closely.
"Kraft is trying to buy Cadbury on the cheap to provide much needed growth to their unattractive low-growth conglomerate business model," said Cadbury Chairman Roger Carr. "Don't let Kraft steal your company with its derisory offer."
Highlighting the strength of its "standalone" strategy, Cadbury outlined a higher growth vision for an independent future as a fully focused confectionery group built around strong sales growth and a rise in profit margins.
The group raised its underlying annual sales growth target to between 5 and 7 percent from its previous 4 to 6 percent range. It sees operating margins by 2013 in a range of 16 to 18 percent after looking for good mid-teens margins by 2011, compared with 11.9 percent in 2008.
It also looked to double-digit percentage rises in dividend payouts from 2010 onwards, and a higher rate of converting operating profits into cash flow also from 2010. In 2008 Cadbury's dividend increased 6 percent to 16.4 pence a share.
Kraft has declined to raise its bid from the terms first announced on Sept. 7 with 300p in cash and the rest in new Kraft shares, determined not to overpay and to play the long game, convinced no rival bidder will emerge.
Analysts believe with Kraft agreeing a US$9.2 billion loan it can raise its cash element by 100p and still maintain its investment grade rating for its debt and be enough to get Cadbury to the negotiating table about a winning bid.
A Kraft-Cadbury deal would create the world's biggest confectionery group overtaking Mars-Wrigley bringing Cadbury's chocolate and Trident gum together with Kraft's brands Milka, Toblerone, Cote D'Or, Terry's and Suchard chocolate brands.
The Dairy Milk chocolate maker today called Kraft's bid "wholly inadequate" kicking off a seven-week fight for its independence, while declining to name Hershey or Italy's Ferrero who have said they are contemplating bids for Cadbury.
"We have had indications of interest from third parties on possible business combinations," Chief Executive Todd Stitzer told a conference call after issuing its defense document.
Cadbury shares rose to an early high of 797-1/2 pence but last traded up 0.2 percent at 791p by 0815 GMT compared to Kraft's hostile bid worth 727p. Most analysts believe Kraft will need to pay 820p to 850p to win Cadbury.
Cadbury and US-based Hershey have held talks over a friendly bid by the US firm, according to the Sunday Telegraph, while Nestle is said by analysts to be watching events surrounding Cadbury closely.
"Kraft is trying to buy Cadbury on the cheap to provide much needed growth to their unattractive low-growth conglomerate business model," said Cadbury Chairman Roger Carr. "Don't let Kraft steal your company with its derisory offer."
Highlighting the strength of its "standalone" strategy, Cadbury outlined a higher growth vision for an independent future as a fully focused confectionery group built around strong sales growth and a rise in profit margins.
The group raised its underlying annual sales growth target to between 5 and 7 percent from its previous 4 to 6 percent range. It sees operating margins by 2013 in a range of 16 to 18 percent after looking for good mid-teens margins by 2011, compared with 11.9 percent in 2008.
It also looked to double-digit percentage rises in dividend payouts from 2010 onwards, and a higher rate of converting operating profits into cash flow also from 2010. In 2008 Cadbury's dividend increased 6 percent to 16.4 pence a share.
Kraft has declined to raise its bid from the terms first announced on Sept. 7 with 300p in cash and the rest in new Kraft shares, determined not to overpay and to play the long game, convinced no rival bidder will emerge.
Analysts believe with Kraft agreeing a US$9.2 billion loan it can raise its cash element by 100p and still maintain its investment grade rating for its debt and be enough to get Cadbury to the negotiating table about a winning bid.
A Kraft-Cadbury deal would create the world's biggest confectionery group overtaking Mars-Wrigley bringing Cadbury's chocolate and Trident gum together with Kraft's brands Milka, Toblerone, Cote D'Or, Terry's and Suchard chocolate brands.
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