[EN-BIZ] "Cadbury" Gets Rival Interest as it Reject Kraft's Bid

It calls Kraft's offer wholly inadequate, ups sales and margin targets

(LONDON) Britain's "Cadbury" said it has received interest from other bidders as it dismissed a £10 billion (S$22.6 billion) bid from "Kraft Foods". The chocolate maker also raised its growth targets.

Cadbury called Kraft's bid 'wholly inadequate' kicking off a seven-week fight for its independence, while declining to name "Hershey" or Italy's "Ferrero" which have said they are contemplating bids for Cadbury.

'We have had indications of interest from third parties on possible business combinations,' chief executive Todd Stitzer told a conference call after issuing its defence document.

Cadbury shares rose to an early high of 7971/2 pence but last traded up 0.19 per cent at 792 pence at 1009 GMT compared to Kraft's hostile bid worth 727 pence. Most analysts believe Kraft will need to pay 820 pence to 850 pence to win Cadbury.

'We are not overwhelmed by Cadbury's defence. . . This is not enough to squeeze a massively higher offer from Kraft in our view,' said analyst James Edwardes Jones at brokers Execution, who added, 'It is difficult to see why Kraft needs to pay up much more than 800 pence.'

Analysts said there were few surprises in Cadbury defence with its 2009 outlook unchanged, while saying it could hit higher margin without further job cuts of factory closures and its higher sales growth would rely on emerging market growth.

Cadbury and US-based Hershey have held talks over a friendly bid by the US firm, according to Sunday Telegraph, while "Nestle" is said by analysts to be watching events surrounding Cadbury closely.

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

Highlighting the strength of its 'standalone' strategy, Cadbury outlined a higher growth vision for an independent future as a fully focused confectionery group built around strong sales growth and a rise in profit margins.

'It is our duty to get the best value for our shareholders and is best achieved as an independent company,' Mr Stitzer said.

The group raised its underlying annual sales growth target to between 5 and 7 per cent from its previous 4 to 6 per cent range. It sees operating margins by 2013 in a range of 16 to 18 per cent after looking for good mid-teens margins by 2011, compared to 11.9 per cent in 2008.

'Assuming the group were to achieve these new targets, Cadbury might be worth something like 675 pence per share on fundamentals. We still believe Kraft needs to offer closer to 850 pence to win the day,' said Credit Suisse analyst Alex Molloy.

It also looked to double- digit percentage rises in dividend payouts from 2010 onwards, and a higher rate of converting operating profits into cash flow also from 2010. In 2008, Cadbury's dividend increased 6 per cent to 16.4 pence a share.

Cadbury held its 2009 forecasts for a 5 per cent rise in underlying sales growth and a 135 basis point rise in margins.

Kraft has declined to raise its bid from the terms first announced on Sept 7 with 300 pence in cash and the rest in new Kraft shares, determined not to overpay and to play the long game, convinced no rival bidder will emerge.

Source : Business Times, 15.12.09.