23 November, 2009
UPDATE 3-Cadbury hits new high as bidders circle
* Rival bidders for Cadbury may emerge
* Chance of competitive auction rises
* Hershey, Ferrero, Nestle weighing up bids
* Cadbury shares 12 pct above Kraft bid
(Adds details on Ferrero in paragraph 4, updates shares)
By David Jones
LONDON, Nov 23 (Reuters) - Speculation about a bid battle
for Cadbury (CBRY.L) among Kraft Foods (KFT.N) and other rivals
lifted shares in the British confectioner to a new high on
Monday but analysts doubt whether a competing bid will emerge.
Most of the other big players in the global confectionery
industry -- U.S.-based Hershey Co (HSY.N), Italy's Ferrero and
Switzerland's Nestle AG (NESN.VX) -- are now weighing bids
themselves, according to Reuters sources and media reports.
Many analysts doubt whether any of these three would bid
alone, but possible combinations of them could trump Kraft's
current cash and shares bid of 9.9 billion pounds ($16.4
billion) or push the American food giant Kraft to raise its
offer.
Italy's Ferrero family is united in its decision to look at
options for British confectioner Cadbury, a source close to the
family told Reuters, despite newspaper reports of a potentially
deal-breaking division among the family. [ID:nGEE5AM2JT]
Kraft made its bid for Cadbury earlier this month and
values the company at arůund 727 pence. The U.S. maker of Milka
and Toblerone chocolates may raise its bid if rival bidders
emerge, said a source familiar with the situation late on
Sunday. [ID:nGEE5AL0HD].
"We still believe Kraft is in the driving seat and it will
increase the cash component of its bid to 4 pounds, bringing
its offer up to 8.26 pounds," said analyst Jon Cox at Kepler
Capital Markets. Kraft's current bid consists of 300 pence of
cash and the rest in new Kraft shares for each Cadbury share.
He is unconvinced about Hershey's ability to fund a bid and
even a combined deal with Ferrero would be hard pressed to get
the finance.
Although Nestle can easily raise the cash, it would have
big anti-trust obstacles especially in the UK, he added.
"We think the probability of a competitive auction for
Cadbury has increased," said analyst Martin Deboo at brokers
Investec Securities.
With the chance of competition rising, Cadbury's shares
rose more than 2 percent to a high of 819-1/2 pence before
closing at 1.7 percent at 814, or nearly 12 percent above
Kraft's current bid at 727 pence.
"We are not convinced that Nestle would launch a bid for
all of Cadbury's assets as this would create anti-trust
problems in certain chocolate markets include the UK," said
analyst Orianne Segaud at brokers Natixis Securities.
Nestle gained a sizeable share of the British chocolate
market when it took over Rowntree in 1988 and putting it
together with Cadbury would likely alert UK regulators.
[ID:nGEE5AM204]
For a graphic on the companies involved please click on:
here
"Acquiring Cadbury would be an impossible task for Hershey
alone but might be more manageable in the context of other
interested parties," said analyst Jeremy Batstone-Carr at
brokers Charles Stanley. [ID:nN23257449]
He said Nestle might be encouraged to make a joint offer
for Cadbury in part based upon the fact that Hershey holds the
lucrative licence to distribute its own Kitkat product in the
United States and a deal with Hershey could see that return.
Investec's Deboo said with the growing possibility of a
competitive auction for Cadbury, he is raising his target price
for Cadbury shares to 810 pence from 785 and is raising his
estimate of Kraft's takeover value of Cadbury to 820 pence from
800, while he still sees a standalone fair value for Cadbury at
750 pence.
Kraft has until Dec. 7 to publish its official offer
document and post it to Cadbury shareholders, which will then
trigger a 60-day takeover timetable under UK rules.
Kraft shares were 0.5 percent higher at $27.30, Hershey
were down 1.5 percent at $36.34, while Nestle shares rose 1.2
percent to 48.37 swiss francs.
(For a column on Cadbury please click on [ID:nGEE5AM1ET])
(Reporting by David Jones, additional reporting by Jo
Winterbottom and Jessica Hall, editing by Matthew Lewis)
(For more M&A news and our DealZone blog, go to
here)
((jessica.hall@thomsonreuters.com; 215-922-1086; Reuters
Messaging: jessica.hall.reuters.com@reuters.net))
($1=.6047 pounds)
Source: http://www.reuters.com
UPDATE 3-Cadbury hits new high as bidders circle Added: (23.11.2009)
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