Cadbury looks to force Kraft's hand on takeover bod
Cadbury Plc, the world's second- biggest candy maker, asked U.K. regulators to force Kraft Foods Inc. to make a formal takeover bid or walk away from its proposal, according to two people familiar with the situation.
The Takeover Panel has begun discussions with advisers for both Cadbury and Kraft and may make a ruling next week on whether to give Kraft a deadline to bid, the people said. They declined to be identified because the discussions were private.
Kraft, the Northfield-based maker of Oreo cookies, said Sept. 7 that it approached Cadbury with a proposed takeover now worth $16.2 billion, seeking the London-based company's prowess selling Dairy Milk chocolate and Trident gum in emerging markets such as India. Kraft Chief Executive Officer Irene Rosenfeld said a week ago that she was considering a formal approach and was trying to engage Cadbury in talks.
Both Rosenfeld and Cadbury Chief Executive Officer Todd Stitzer delivered speeches to investors at a Merrill Lynch & Co. conference in London today.
"There's a lot of posturing going on," Warren Ackerman, an analyst at Evolution Securities Ltd. in London, said in an interview. "Things were at a bit of a stalemate but we might see a flurry of action when Kraft come back" and rival bidders are drawn out by a higher offer, he added.
Trevor Datson, a Cadbury spokesman, and Charles Crawshay, deputy director general of the Takeover Panel, both declined to comment, as did a spokesman for Kraft, the world's second- biggest food company.
When the Takeover Panel issues a so-called put up or shut up notice, a bidder is given a deadline of about a month to make a formal offer. If the potential acquirer declines to do so, it can't bid again for the same target for six months.
The Financial Times, which earlier reported Cadbury's approach to the Takeover Panel, said Kraft was surprised at the speed of the U.K. company's approach to the regulator. The FT cited people close to Kraft that it didn't identify.
Kraft's cash-and-stock proposal was worth 745 pence when it was announced on Sept. 7, though the offer value fell below 706 pence three days later as Kraft's shares declined. The approach is now worth 724 pence.
Cadbury shares rose 3 pence, or 0.4 percent, to 791 pence at 3:08 p.m. in London and have traded above the proposed takeover price since Sept. 7 on speculation Kraft will be forced to raise its offer or a rival bidder, such as Hershey Co. or Nestle SA, will emerge.
That scenario is "unlikely," Pablo Zuanic, an analyst at JPMorgan Chase & Co. in London, said in a note last week. More likely is that Kraft will raise its bid by 135 to 170 pence, he said. The food maker can afford to do so as its stated target of $625 million of cost synergies from the deal could actually amount to between $1.5 billion and $1.7 billion, Zuanic added.
Cadbury Chairman Roger Carr has called Kraft's offer an "unappealing prospect" from a "low-growth conglomerate." The Wall Street Journal interviewed Stitzer yesterday and interpreted his remarks to say he softened his stance toward Kraft's approach.
"I would never say there's not some strategic sense in these businesses coming together," Stitzer told the newspaper, saying that the companies shared complementary aspects in Europe, Brazil, Russia and China.
Datson, the Cadbury spokesman, yesterday said Stitzer's remarks were "not a change in stance." Representatives of the two companies haven't met since Carr and Rosenfeld met in London on Aug. 28, according to Datson.
The Panel on Takeovers and Mergers, established in 1968, regulates corporate acquisitions in Britain and says its "central objective is to ensure fair treatment for all shareholders in takeover bids."