* Cadbury calls Kraft's bid even more unattractive
* Mandelson urges investors to take long-term view
* Doubts raised on how Hershey can fund a rival deal
* Cadbury shares close 1.2 percent up at 796 pence
(Releads with Cadbury comments, investor, share price)
By David Jones
LONDON, Jan 14 (Reuters) - Cadbury (CBRY.L) fired the final
salvo in its defence on Thursday, branding Kraft Foods' (KFT.N)
bid as more unattractive than a month ago, as Cadbury shares
rose on hopes of a rival bid from Hershey (HSY.N).
But as Cadbury's Chairman Roger Carr attacked Kraft's bid
and its past performance, analysts remained doubtful over how
the much-smaller Hershey could finance an offer for Cadbury and
top Kraft's 10.5 billion pound ($17.1 billion) hostile bid.
"Kraft's offer is even more unattractive today than it was
when Kraft made its formal offer in December," Carr said in a
final defence leaving Kraft five days to sweeten its offer.
Because the bid is over half in Kraft's shares, it exposed
shareholders to Kraft's history of missed targets compared with
Cadbury's robust results and excellent momentum into 2010, while
the deal undervalued Cadbury compared with recent deals, he
This came after Britain's Business Secretary Peter Mandelson
met with fund managers to urge them to take a more long-term
view in takeover bids, and as Kraft's CEO Irene Rosenfeld went
from door to door to woo Cadbury shareholders in London.
Hershey is still working on a Cadbury bid to top Kraft's
offer according to a source familiar with the matter on
Wednesday, while the Financial Times said Hershey had authorised
drawing up a bid for Cadbury and making an offer within weeks.
But analysts said a solo Hershey bid could be extremely
challenging as Hershey is only half the size of Cadbury and a
big share issue would dilute the controlling Hershey Trust,
while Kraft still has the option to sweeten its current bid.
"We view a solo Hershey bid as a probability of 15 percent.
We estimate a two-third probability of Kraft winning," said
analyst Simon Marshall-Lockyer at Jefferies International, with
the other probability being Cadbury remaining independent.
Other analysts pointed out that under the current timetable,
Hershey only has nine days to come up with a formal offer which
could prove tight if it is looking for partners to finance the
bid and find buyers for parts of the Cadbury's business.
The FT report said Hershey was discussing a plan to
authorise banker Byron Trott to bring private equity investors
into the deal. Trott is a favourite adviser of Warren Buffett,
whose Berkshire Hathaway (BRKa.N) is Kraft's top shareholder.
Marshall-Lockyer believes Hershey would likely have to sell
its KitKat franchise in the United States back to Nestle
(NESN.VX) for around $1.6 billion and then sell Cadbury's
Trident gum business for $12.9 billion to leave Hershey with
Cadbury's chocolate and candy businesses.
Cadbury has been defending itself for over four months
against Kraft's bid worth 762 pence against Cadbury shares which
closed 1.2 percent higher at 796p on Thursday, while analysts
and investors say that Kraft needs to offer 800p or above to
Under UK takeover rules, Kraft has until Jan. 19 to sweeten
its bid, while Hershey has until Jan. 23 to declare its hand and
Cadbury shareholders until Feb. 2 to decide on the Kraft bid.
For a graphic comparing Cadbury, Kraft and Hershey:
For a BREAKINGVIEWS column, click on [ID:nLDE60D0M2]
Analyst Jeremy Batstone-Carr at Charles Stanley says any
Hershey approach would have to be in cash and shares and involve
a rights issue to leave the Hershey Trust without control. Even
with selling off KitKat in the US and Cadbury's gum, Hershey
would still struggle to mount a stand alone bid, he added.
"We view the likelihood of its success as low, particularly
given our strongly held belief that Kraft will raise its offer,"
Meanwhile, Britain's Mandelson was urging big investors to
take a longer-term view and not ignore local and workforce
interests in takeover situations. [ID:nLDE60D0DA]
"I ask Cadbury shareholders to take a longer view of
shareholder value. I'm not in a position to block takeovers but
I do have an obligation to raise and ask questions," he said.
While Kraft's Rosenfeld struggled to convince Cadbury
shareholders of her case according to one top stockholder.
"Kraft didn't have much to say. In fact, I thought it was a
bit of a waste of time really. They seemed to be saying we are
here now and you will hear from us at a later stage. They talked
about strategy, but there was nothing beyond that".
(Additional reporting by Victoria Howley and Raji Menon)
(Reporting by David Jones; Editing by Jon Loades-Carter)
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