Cadbury rejects Kraft offer; Hershey may weigh in
Cadbury P.L.C., one of the world's largest chocolate companies and a potential strategic partner for Pennsylvania's Hershey Co., has rebuffed a friendly $16.7-billion acquisition offer from food giant Kraft Foods Inc. in what some analysts believe could be a protracted and expensive battle for global chocolate market share.
Cadbury P.L.C., one of the world's largest chocolate companies and a potential strategic partner for Pennsylvania's Hershey Co., has rebuffed a friendly $16.7-billion acquisition offer from food giant Kraft Foods Inc. in what some analysts believe could be a protracted and expensive battle for global chocolate market share.
The Cadbury price could go higher and Hershey or other bidders could take part, analysts say. Mars Inc. closed on its huge acquisition of Wm. Wrigley Jr. Co. in 2008.
Food company stocks rose yesterday as Wall Street believed deals could ripple through the sector.
Hershey stock jumped 50 cents to close at $39.13, and Campbell Soup Co., which isn't related to the chocolate deal but is typically rumored as a tasty acquisition morsel, soared $1.19 to $32.38. Kraft stock fell $1.65 to $26.45 on concerns over the debt necessary to close a deal.
Hershey, based in central Pennsylvania, has a distribution agreement with Cadbury and has talked previously about a merger. Hershey is monitoring the Kraft-Cadbury talks and could have a response, according to published reports.
A Hershey spokesman said yesterday the company did not comment on "merger and acquisition issues."
"All companies have personalities, and Hershey does not seem like a company with the personality to get involved in a messy situation like this," said Jack Russo, equity analyst with Edward Jones. "But you never know."
Cadbury, on Monday, said it rejected the Kraft bid as too low.
Other speculation has Hershey either linking up with Nestle, or being acquired by Nestle.
A big obstacle with Cadbury is the price. Hershey has a market-capitalization of $8.7 billion, so a deal for U.K.-based Cadbury, whose brands include Flake and Wispa chocolate bars and Trident and Bubbaloo chewing gum, would require debt and potential dilution of Hershey stock.
The conservatively run Hershey is controlled by a multi-billion-dollar trust created by company founder Milton Hershey. The trust owns the Hershey Amusement Park and finances a private school for disadvantaged children.
The trust has said that maintaining control of the chocolate company and keeping its headquarters in Pennsylvania are important. The Hershey board includes former Pennsylvania Gov. Tom Ridge and James Nevels, the non-executive chairman of the Hershey board. Nevels is chairman of the Swarthmore Group, a Philadelphia investment-advisory firm.
Hershey is the nation's largest chocolate company, with brands that include the iconic Hershey bar and Reese's peanut butter cups, and ranks fourth globally - behind Mars, Cadbury, and Nestle.
