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November 23, 2009

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Hershey makes sweeter offer for Cadbury's

HERSHEY Co may make a US$17 billion bid for United Kingdom candy company Cadbury Plc, topping the recent US$16.5 billion hostile offer by Kraft Foods Inc, according to The Wall Street Journal.

The bid wouldn't be ready for two weeks and the terms are in flux, the newspaper cited people close to the matter as saying on Friday.

But the people said the charitable trust that controls the company and has complicated Hershey's merger efforts in the past is now prodding CEO David West to beat Kraft's offer, the newspaper reported.

The offer is expected to include at least US$10 billion in cash from Hershey, plus US$2 billion in new Hershey shares and another US$3 billion to US$5 billion in cash from investors in exchange for equity in Hershey.

Hershey adviser Byron Trott, a former Goldman Sachs banker known for his close relationships with billionaire Warren Buffett and other major investors, is courting new investors. Buffett, whose investment firm Berkshire Hathaway is the biggest shareholder in Kraft, called Kraft's original offer for Cadbury "pretty full."

The trust would sell about US$1 billion worth of assets but hopes to structure the deal to maintain control of Hershey, according to the newspaper, which says Hershey and the trust are working with two banks to raise the money: JPMorgan Chase and Bank of America Merrill Lynch.

Kraft has made clear that it, like Hershey, wants access to Cadbury's presence in developing markets such as Mexico and India. Its November 9 offer includes 40 percent cash and the rest in stock.

Cadbury quickly dismissed it as too low, but Kraft has until December to present it directly to shareholders.

"We're the only offer on the table," Kraft spokesman Michael Mitchell told The Associated Press. "And we're confident we're the best, most logical partner for Cadbury."

With US$9 billion lined up from lenders, Kraft could top a bid from Hershey.


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