Cadbury launches defense against Kraft offer

[December 14, 2009]  LONDON (AP) -- Cadbury PLC revealed Monday it has received approaches from rival suitors to Kraft Foods Inc. as the British candymaker launched a robust defense against the U.S. company's attempts to buy it "on the cheap" with a 9.8 billion pound ($16.3 billion) hostile bid.

Cadbury Chairman Roger Carr warned shareholders not to let Kraft "steal your company with its derisory offer" as the British chocolate and gum maker increased its long term performance targets to play up its position as a strong independent company.

But is also revealed that it had been approached by a number of other suitors, which executives declined to name, with a mix of proposed offers.

"Cadbury is an exceptional business worth much more than the offer put forward by Kraft," Carr said in an official defense document posted to the company's shareholders. "It is clear to all that Cadbury is a particularly attractive asset in the sector with iconic brands, a sharp category focus and an enviable geographic footprint."

Kraft -- the maker of Oreo cookies, Nabisco crackers and its namesake cheese -- took its cash and shares offer straight to shareholders of the British candy company earlier this month after the Cadbury board rejected an almost identical approach.

The proposed deal includes 300 pence in cash and 0.2589 new Kraft shares for each Cadbury share, worth 727 pence a share at the close of trading on Dec. 11.

"Kraft is trying to buy Cadbury on the cheap to provide much needed growth to their unattractive low-growth conglomerate business model," Carr told shareholders. "Don't let Kraft steal your company with its derisory offer."

Shares in Cadbury have shot up in recent weeks on the prospect of a bidding war and CEO Todd Stitzer confirmed Monday that the company had received "indications of interest from third parties on possible business combinations."

U.S. chocolate maker The Hershey Co. has previously said it was considering an offer alongside Italy's Ferrero International SA. Analysts have also suggested that Nestle SA may be interested, although the Swiss company has made no comment.

Kraft CEO and chairman Irene Rosenfeld has argued that the speculation has inflated Cadbury's share price, and that Kraft's offer is a substantial premium to Cadbury's "unaffected" share price.

The stock was trading at 792 pence per share on Monday, up 0.25 percent.

Rosenfeld has also stressed that the proposed deal "provides both immediate value certainty and meaningful longer-term upside potential."

If Kraft is successful, the deal would create a global giant with an estimated $50 billion in combined revenue. Kraft already is the world's second-largest food maker after Nestle.

Cadbury, the maker of Dairy Milk chocolate and Dentyne gum, is an attractive acquisition. As one of the world's largest confectionary companies, it has strong international reach with a key presence in emerging markets.

The company announced new long term targets on Monday, including organic revenue growth of 5-7 percent per year, improved margins of 16-18 percent by 2013 and double digit growth in dividends per share from 2010 onwards.

In an accompanying trading update, Cadbury CEO Todd Stitzer said the company was planning for full year revenue growth "around the middle of our 4-6 percent goal range, and for an improvement of at least 135 basis points in constant currency trading margin."

The company said its chocolate division continued to pick up momentum in emerging markets, particularly India, and in key developed markets, including Britain. Its gum division was benefiting from innovations of existing products, such as Trident Layers in the United States and new Trident packs in South America.

In the candy business, high numbers of people suffering from flu drove "strong growth" of its Halls throat lozenges.

But bidders face some strong opposition to the potential loss of the 195-year-old company's independence. At least one member of Cadbury's founding family has spoken out against it and the country's leading labor union is yet to be appeased about potential job losses.

Kraft has said it wants to get the majority shareholder votes by Jan. 5, but it can take until February to complete the process under regulations.

[Associated Press; By JANE WARDELL]

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