Kraft Foods Inc may raise its offer for British chocolatier Cadbury PLC or offer more cash in its bid if rival takeover offers emerge, a source familiar with the situation said on Sunday.
Kraft took a US$16.8 billion hostile offer for Cadbury to shareholders two weeks ago. Most of the remaining large players in the global confectionery industry — US-based Hershey Co, Italy’s Ferrero and Switzerland’s Nestle — are now weighing takeover bids themselves, sources and media reports have said.
Kraft could keep its bid unchanged if no rival bidders emerged, however, a source said.
PHOTO: BLOOMBERG
Kraft “made an offer to start the process,” the source said, who declined to be named because they were not authorized to speak with the media.
Kraft “never said that was its final offer,” the source said.
Kraft could not be immediately reached for comment.
Cadbury, which has slammed Kraft’s existing offer as “derisory,” has recently attracted greater takeover interest as rivals contemplate how the industry will be reshaped if the maker of Dairy Milk chocolates is acquired. Cadbury is the world’s second-largest confectioner, but would vault to the top spot in a combination with Kraft, ahead of Mars-Wrigley.
Nestle was still weighing its options and could decide against a bid, Bloomberg said, citing two unnamed people with knowledge of the matter.
Ferrero and Hershey said on Wednesday they were reviewing a possible offer for Cadbury, while sources familiar with the matter said they were considering a joint bid.
Hershey also is weighing a solo US$17 billion offer, a source said on Friday.
Italian newspaper Il Sole 24 Ore reported that Hershey executives would meet Ferrero officials in Italy in the coming days.
Nestle declined to comment on Sunday. Ferrero and Hershey could not be reached for comment.
Cadbury maintains it is worth more than the Kraft cash and stock offer that valued the company just shy of £7.18 (US$11.87) based on Friday’s price. Cadbury investors have said they would not contemplate an offer below £8, with £8.20 considered a potential deal-closer.
“We’re focused on delivering value to shareholders as a stand-alone, pure-play confectioner,” Cadbury said in a statement. “However, we’ve always said we’d give proper consideration to any serious offer that delivers full value for the company. Unless and until we find ourselves in that situation, we have nothing to comment on.”
Faced with a choice between the two US companies, Cadbury chairman Roger Carr said he would prefer a merger with Hershey rather than Kraft. But he added that both bids could fail should they not be generous enough.
“Clearly, whilst some potential offerors are more aligned with our business model than others, it is the value of the offer rather than the source of the offer that is our priority,” Carr told the Sunday Telegraph.
Analysts had viewed Nestle as a potential suitor for Cadbury since Kraft made its offer public on Sept. 7, but such a deal may face antitrust hurdles. The company has also said it does not plan any big acquisitions this year or next, but will focus on a strategy of “bolt-on” buys.
At the same time, the world’s largest food maker could easily swallow a large purchase. Nestle said last month it was likely to exercise its option beginning in January to sell its remaining 52 percent stake in Alcon, potentially raising up to US$28 billion.
Given competition issues, analysts had speculated that Nestle might consider a joint offer with Hershey, with the US group taking on Cadbury’s chocolate operations and leaving Nestle with the Trident chewing gum business.
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