Hershey Co may make a US$17 billion bid for UK candy company Cadbury PLC, topping the recent US$16.5 billion hostile offer by Kraft Foods Inc, the Wall Street Journal reported on Friday.
People close to the matter said the bid wouldn’t be ready for two weeks and the terms are in flux, it reported
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 Journal reports.
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.”
Kraft has made clear that it, like Hershey, wants access to Cadbury’s presence in developing markets such as Mexico and India.
Kraft’s Nov. 9 offer was quickly dismissed by Cadbury as too low, but the company has until next month to present it directly to shareholders.
“We’re the only offer on the table,” Kraft spokesman Michael Mitchell said. “And we’re confident we’re the best, most logical partner for Cadbury.”
Representatives for Hershey, the Hershey trust and Cadbury declined to comment on Friday.
Hershey chief executive David West has been talking with Italian candy maker Ferrero Spa about a possible joint bid for Cadbury, the Journal reported, writing also that a person familiar with the matter said those negotiations had not advanced.
The Hershey Trust funds a boarding school for low-income children in Hershey, Pennsylvia. It has resisted large-scale deals before and its insistence on retaining control has complicated talks about acquiring Cadbury. But trust board members have decided Hershey must expand more outside the US to keep growing and preserve funding for the school, those close to the matter said.
“It has decided it must be a consolidator before it is consolidated, which would risk its mission,” said one person familiar with the trust’s thinking, according to the Journal.
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