Don't let Kraft 'steal' our company, Cadbury's boss tells shareholders

Expert warns that takeover by the US food firm would be 'disaster'

Cadbury yesterday reiterated its fierce opposition to the £10.5bn hostile bid made by the US food group Kraft, as the Dairy Milk maker unveiled 2009 results ahead of City expectations.

Publishing its second defence document, Cadbury's chairman Roger Carr urged shareholders not to let Kraft "steal" the company and lambasted the lower growth of Kraft's sales and share price over recent years. He claimed that Kraft's underperfomance was partly because of its management, who "consistently promise one thing and deliver something else".

His comments came as Professor Chris Bones, the dean of Henley Business School, told a Parliamentary committee that a Kraft takeover of Cadbury would be a "potential disaster" that would lead to hefty job losses.

Mr Carr said that Kraft's offer was "even more unattractive" than when it made its formal bid in December, given its strong performance in 2009. Its chief executive Todd Stitzer described as "terrible" Kraft's offer of 0.2589 of its own shares and 300p of cash for each Cadbury share.

Cadbury, which also makes Green & Blacks chocolate, pointed out that Kraft is only offering a multiple of 12 times the UK company's 2009 earnings before interest, depreciation, tax and amortisation, which it said was a "very significant discount to comparable confectionery transactions".

Kraft's offer valued the company at 764p in trading yesterday afternoon. But the City believes Kraft will have to raise it price beyond 800p to have any chance of progressing. The American food group has until 19 January to give details of a sweetened bid or to raise its offer, unless any competing offer is submitted.

In its headline figures for 2009, Cadbury posted underlying revenues up by 5 per cent, bolstered by a 6 per cent rise in the second half. The company, which is based in Bournville, Birmingham, also boasted a trading margin of 13.5 per cent, up by 160 basis points at constant currency. Its Vision into Action cost-saving initiative drove the uplift in margins, which means the efficiency programme has delivered 70 per cent of its original target in half the time. Cadbury is due to confirm or revise its 2009 estimates on Thursday afternoon.

Yesterday, Cadbury also unveiled a 10 per cent growth in its full-year dividend. Last month, Cadbury vowed to deliver revenue growth of between 5 and 7 per cent over the next three years and margins of 16 to 18 per cent by 2013.

Kraft has publicly questioned whether Cadbury can hit such targets. Yesterday, a spokesman said: "Cadbury's final defence document is underwhelming. They have said very little that is new and have ducked the issue of their profitability in 2010. We continue to believe that the certainty and upside potential provided by our offer remains the best option for Cadbury's shareholders."

Rival confectionery companies Hershey and Ferrero are also considering a deal for Cadbury. Yesterday, Mr Carr said "nothing had changed" regarding Kraft's offer being the only one on the table, but again hinted it would prefer a tie with one of its confectionery rivals to a deal with Kraft. "They [Hershey and Ferrero] are both pure-play confectionery so that makes them a similar model to us. They both share similar values and are family businesses so that makes them attractive."

Speaking at the parliamentary business, innovation and skills committee, Mr Bones, who spent nearly 10 years as a Cadbury executive, said: "Having worked for one company, and looked very hard at the other, their cultures are so different and their ways of operating so different that this cannot be anything but a potential disaster – whatever price Kraft pays."

Charm offensive: Rosenfeld flies in

Irene Rosenfeld, Kraft's chief executive, launched her company's bid for Cadbury with as much charm as she could muster, calling herself a "heavy, heavy user" of Trident gum and describing eating a Creme Egg as a "one-of-a-kind experience".

But then there was silence. Only now, in what grumbling Cadbury shareholders are calling a "belated charm offensive", is Ms Rosenfeld in London to chew the fat with investors. They want to press her into raising Kraft's bid to something with an eight in front of it; she will listen, set out some of the post-merger financials, and ask Cadbury's shareholders to commiserate that she has Warren Buffett breathing down her neck.

It is unlikely to charm, but then Ms Rosenfeld, and Kraft's advisers at Lazard, know it is money that talks, and their hope has always been that putting an offer on the table will shift the balance of the Cadbury shareholder register away from long-term holders. Erin Swanson, an analyst at Morningstar, says Ms Rosenfeld's reputation was high going into the bid battle. "She has been instrumental in providing renewed life."

At 56, this basketball-playing, rollerblading executive has also got a reputation for getting what she wants – eventually. From her first job as a market research manager, she spent 22 years at the company, but was passed over for the top job on its flotation in 2001. She quit, and went to run Frito-Lay, Pepsi's crisps and snacks division, where a blizzard of new product launches so burnished her credentials she got a second shot at the top job at Kraft two years later. This time she hopes to win first time.

Stephen Foley

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