The Battle for Cadbury: Experts Evaluate Potential Suitors
September 9, 2009 - On Labor Day, Kraft Foods created headlines when it revealed that it had made an unsolicited takeover offer for Cadbury, valuing the company at more than $16 billion. The Board of Cadbury swiftly rejected the proposal, citing confidence in its standalone strategy and growth prospects as a result of its strong brands, unique category and geographic scope. Cadbury also said that that the proposal fundamentally undervalues the group and its prospects.
A deal between Kraft and Cadbury could create a global powerhouse in snacks, confectionery and quick meals with a rich portfolio of iconic brands. Together, the companies would bring in approximately $50 billion in revenues. "This proposed combination is about growth," says Irene B. Rosenfeld, chairman and CEO of Kraft. "We are eager to build upon Cadbury's iconic brands and strong British heritage through increased investment and innovation."
Despite Cadbury's resistence, Kraft remains committed to a potential takeover and announced its proposal on Monday as a means to encourage and further that process. But the announcement may also encourage rival offers from other confectionary giants, like Nestle and Hershey.
Which company has the biggest chance at winning the Cadbury prize? Bloggers reveal their opinions here:
"Some analysts speculated about a possible joint bid by Nestle and Hershey, allowing Nestle to take Cadbury's gum business to compete with Mars, while Hershey takes over the chocolate operation. Meanwhile, there is also speculation about whether Kraft might sweeten its own bid. Some analysts said Monday they think the company might need to raise its offer by up to 40 percent." - Andrew Ross Sorkin, DealBook
"We feel that Kraft might be the only probable suitor. Nestle? Although premium chocolate could fit with health, nutrition and wellnesss, this is not what Cadbury is about. In addition, Nestle's CFO has also said in the past that Nestle is not interested in gum. As a result, we are not convinced that Nestle is ready to make a multi-billion bid for Cadbury or Hershey. Hershey? Hershey Trust does not seem to be prepared to lose its controlling interest in the company. They may accept being diluted to 51 percent and join in a JV in order to get better access to international markets." - Veronique Adam, Seeking Alpha
"The fun of Kraft-Cadbury as it plays out in coming days and weeks will lie in what it means for the food industry specifically, and broadly how it shapes the mergers-and-acquisitions scene as the recession subsides. Cadbury has rejected Kraft's bid and whether the U.S. company has the wherewithal to sweeten its offer remains to be seen... Will Cadbury seek a white knight savior from some of these candy companies -- Nestle, Hershey, Mars? Will this drama kick off consolidation in other corners of the food industry? Mid-size H.J. Heinz, for one, is ripe to be picked off by a player eager for its affordable jarred and canned goods." - Gabriella Stern, Dow Jones Newswires
"Despite all the talk, here are some reasons why Hershey could have a tough time topping the Kraft bid: The biggest obstacle is that the Hershey family trust, which controls 80 percent of the voting stake in the Pennsylvania chocolate maker, isn't likely to agree to any deal for Cadbury that would dilute its control. The trust balked when Hershey and Cadbury discussed a possible merger in 2008 and there's no reason to think much has changed a year later. To avoid the dilution issue, Hershey would likely have to offer more cash, than stock. But where is Hershey going to find that cash? The company, which has a market value of $8.8 billion, would likely have to take on loads of debt to come up with enough cash to top Kraft's offer. There is speculation that Hershey could team up with the much larger, better financed Nestle to bid for Cadbury. But a tie up between Cadbury and Nestle, which both sell lots of chocolate in the U.K., likely would face regulatory hurdles there." - Michael Corkery, Deal Journal
A deal between Kraft and Cadbury could create a global powerhouse in snacks, confectionery and quick meals with a rich portfolio of iconic brands. Together, the companies would bring in approximately $50 billion in revenues. "This proposed combination is about growth," says Irene B. Rosenfeld, chairman and CEO of Kraft. "We are eager to build upon Cadbury's iconic brands and strong British heritage through increased investment and innovation."
Despite Cadbury's resistence, Kraft remains committed to a potential takeover and announced its proposal on Monday as a means to encourage and further that process. But the announcement may also encourage rival offers from other confectionary giants, like Nestle and Hershey.
Which company has the biggest chance at winning the Cadbury prize? Bloggers reveal their opinions here:
"Some analysts speculated about a possible joint bid by Nestle and Hershey, allowing Nestle to take Cadbury's gum business to compete with Mars, while Hershey takes over the chocolate operation. Meanwhile, there is also speculation about whether Kraft might sweeten its own bid. Some analysts said Monday they think the company might need to raise its offer by up to 40 percent." - Andrew Ross Sorkin, DealBook
"We feel that Kraft might be the only probable suitor. Nestle? Although premium chocolate could fit with health, nutrition and wellnesss, this is not what Cadbury is about. In addition, Nestle's CFO has also said in the past that Nestle is not interested in gum. As a result, we are not convinced that Nestle is ready to make a multi-billion bid for Cadbury or Hershey. Hershey? Hershey Trust does not seem to be prepared to lose its controlling interest in the company. They may accept being diluted to 51 percent and join in a JV in order to get better access to international markets." - Veronique Adam, Seeking Alpha
"The fun of Kraft-Cadbury as it plays out in coming days and weeks will lie in what it means for the food industry specifically, and broadly how it shapes the mergers-and-acquisitions scene as the recession subsides. Cadbury has rejected Kraft's bid and whether the U.S. company has the wherewithal to sweeten its offer remains to be seen... Will Cadbury seek a white knight savior from some of these candy companies -- Nestle, Hershey, Mars? Will this drama kick off consolidation in other corners of the food industry? Mid-size H.J. Heinz, for one, is ripe to be picked off by a player eager for its affordable jarred and canned goods." - Gabriella Stern, Dow Jones Newswires
"Despite all the talk, here are some reasons why Hershey could have a tough time topping the Kraft bid: The biggest obstacle is that the Hershey family trust, which controls 80 percent of the voting stake in the Pennsylvania chocolate maker, isn't likely to agree to any deal for Cadbury that would dilute its control. The trust balked when Hershey and Cadbury discussed a possible merger in 2008 and there's no reason to think much has changed a year later. To avoid the dilution issue, Hershey would likely have to offer more cash, than stock. But where is Hershey going to find that cash? The company, which has a market value of $8.8 billion, would likely have to take on loads of debt to come up with enough cash to top Kraft's offer. There is speculation that Hershey could team up with the much larger, better financed Nestle to bid for Cadbury. But a tie up between Cadbury and Nestle, which both sell lots of chocolate in the U.K., likely would face regulatory hurdles there." - Michael Corkery, Deal Journal