$16.7b offer may spur Hershey, Nestle to act
 | Cadbury said Kraft’s bid “fundamentally undervalues’’ the company. (Paul Ellis/ AFP/ Getty Images) |
LONDON - Kraft Foods Inc., the second-largest food company, said yesterday that it will pursue a takeover of Cadbury PLC even after the British maker of Trident gum and Dairy Milk chocolate rejected a $16.7 billion bid.
Cadbury shares soared 38 percent, pushing its market value above the bid price.
Kraft’s proposal may trigger rival offers from Nestle SA and Hershey Co., forcing Kraft to raise its bid, analysts said.
Kraft, the maker of Oreo cookies and Kool-Aid drinks, said that buying the UK company would create a “global powerhouse’’ with annual revenue of about $50 billion.
Kraft’s bid “might seem attractive, but we think Cadbury can get much more,’’ said Andrew Wood, an analyst at Sanford C. Bernstein in New York. “It makes perfect sense for Kraft to acquire Cadbury.’’
Northfield, Ill.-based Kraft plans to make an offer that values the confectioner at 31 percent more than last week’s closing stock price. Cadbury said the bid “fundamentally undervalues’’ the company.
“It’s clearly hostile,’’ said Andy Smith, an analyst at Icap PLC in London. The deal is a “near perfect geographical fit. It’s unlikely Kraft will just walk away.’’ Smith said the US company may need to raise the cash component.
Kraft said its announcement aimed to “encourage and further’’ dialogue with Cadbury after its approach was rebuffed.
Legal & General Investment Management Ltd., Cadbury’s biggest shareholder, said that Kraft’s offer “materially undervalues’’ the company and that it supports Cadbury’s management in rejecting the approach.
“There is a reasonable chance that Nestle/Hershey could counterbid, with Nestle taking gum and Hershey taking chocolate,’’ Evolution’s Ackerman said in a note. Nestle declined to comment.
The US company is “very weak’’ in the United Kingdom and strong in markets such as Brazil and Scandinavia, where Cadbury is “not a player,’’ Smith said. Kraft also lacks expertise in gum, which Smith called the candy market’s “most attractive space.’’
Ackerman said it was inevitable that Cadbury would be bought after Mars Inc. acquired chewing gum maker Wm. Wrigley Jr. Co. in 2008.
Kraft’s biggest shareholder is billionaire investor Warren Buffett, whose Berkshire Hathaway Inc. owns almost 10 percent.
With Cadbury, Kraft would match Mars’ 15 percent share of the global candy market, Ackerman said.
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