Cadbury sweet on Hershey takeover

By Jenny Wiggins in London and Justin Baer in New York

STORY HIGHLIGHTS

Cadbury expecting friendly bid from Hershey if US confectioner can arrange financing
Charitable trust controling Hershey is pushing company's management to put together £10.3bn bid
Earlier £9.8bn hostile bid from Kraft uses stock, debt and contributions from investors such as pension funds

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(FT) -- Cadbury is expecting a friendly bid from Hershey if the US confectioner can arrange the financing for a takeover offer.

The British chocolate maker is more amenable to being owned by Hershey than Kraft, the US food conglomerate, if a bid comes at the right price.

The charitable trust that controls Hershey is pushing the company's management to put together a £10.3bn bid that would trump a £9.8bn hostile bid from Kraft using stock, debt and contributions from investors such as pension funds.

If Hershey is successful in launching an offer at an attractive price, it would be a more welcome suitor than Kraft.

"These are people who know each other," said one person close to Cadbury yesterday. "I don't think anyone doubts the logic of it." However, a bid would only succeed if it was high enough, the person said.

Cadbury has insisted that it does not need a white knight to help fend off Kraft and that it can create value for shareholders as a stand-alone confectionery company. Institutional investors believe that it is worth between 800p and 850p a share. Cadbury's shares closed at 800½p on Friday.

Todd Stitzer, Cadbury's chief executive, has acknowledged the financial and strategic logic of a merger with Hershey and the companies have held informal talks in the past.

Hershey holds a licence to distribute products under the Cadbury brand name in the US and the two claim to share similar values. It remains unclear whether Hershey would be joined in making a bid by Italy's family-owned Ferrero,

A bid from Hershey is not imminent, and the company and its charitable trust still need to determine how much debt they are willing to add to the combined company. Even if Hershey finds a structure that ensures the trust remains in control, the added leverage could limit options for raising capital once the deal closes.

Further signs of Cadbury's openness to a friendly bid from Hershey came amid renewed speculation over the weekend that Nestlé, which has not ruled itself out in spite of the likelihood of antitrust issues in the UK, was weighing its options.

Cadbury has disdained Kraft's approach. Kraft went hostile on November 9 on the same terms as an indicative offer, valuing Cadbury at 717p a share. It has never indicated that it has made its final bid, but is content to wait to see if a rival emerges before it makes its next move.