Chocolate kisses
Kraft may have found the perfect time to land Cadbury, according to a source close to the situation.
The Chicago food giant made an unsolicited proposal to buy the UK-based confectioner for $16.7 billion; Cadbury rejected the offer, saying Kraft had undervalued the company.
Yet, the bid hit a 31 percent premium to Monday’s stock price in London. And, the source said, potential competitors appear to be sidelined.
Other food companies have known for months that Cadbury might be a receptive target. The fact that none of them moved on it indicates that they can’t — or won’t — for now.
Potential suitors have other concerns. Unilever installed a new CEO just several months ago and PepsiCo recently spent billions to buy its biggest bottlers. For its part, Nestlé has already considered the idea of buying Cadbury, but did not take any action, said the source who has direct knowledge of the situation.
Hershey, meanwhile, is simply too small to digest Cadbury without a partner. Though news reports say Hershey has just hired JPMorgan Chase, a well-placed source said the candy company has been working with the bank for months and that this is not a new assignment. Hershey declined to comment.
The source said he expected Cadbury to spend the next few weeks trying to get Kraft to raise its bid — say, by buying its US rival, Hershey.
So far Kraft has only floated the idea of a deal, hoping that Cadbury would be receptive. The next likely move, according to sources, would be to make a formal offer, which would give Cadbury shareholders a chance to weigh in on the deal.
Kraft is in talks with Citigroup and Deutsche Bank to arrange about $8 billion of financing for its bid, Bloomberg reported.
Shareholder activist Nelson Peltz, who has pressured Cadbury to sell, is on both sides of the deal as a major stockholder in Cadbury and Kraft. He would benefit from the current proposal, but may not if Kraft raises its bid enough to significantly dilute its share price.
Meanwhile, if this buyout happens it may spur some smaller food deals, sources said.
Hershey could eventually sell itself to Nestlé, although the trust that controls Hershey explored selling the business several years ago, and elected not to pursue a deal.
There is mixed opinion on how much a Kraft-Cadbury merger would hurt Hershey in the US. Kraft could aggressively sell Cadbury’s chocolates in the States, where Cadbury has little presence, eating into Hershey’s sales.
Heinz has also considered merging with Campbell Soup, as many cost savings could be wrung from combining the businesses. Campbell has been resistant.
Still, Campbell shares rose 4 percent yesterday after the Kraft proposal became public. Now, the family that controls more than 50 percent of Campbell’s voting stock may consider a move.
