The future of Cadbury as an independent British company appeared murkier than ever last night after reports that on top of the hostile bid for control already launched by Kraft, it was also being circled by the American sweets giant Hershey's in partnership with the smaller Italian confectionery group Ferrero.
Earlier yesterday, there was talk that Ferrero alone was exploring ways of intervening to save Cadbury from the advances of US-based Kraft. However, it now seems that Ferrero may be considering a much more robust move, bidding jointly with Hershey for ownership of Cadbury. The two companies have allegedly been in secret talks "for weeks" about making the alliance.
A source for Cadbury, which is seeking to repel the £9.7bn bid from Kraft, said the firm had not been talking to Ferrero or anyone acting for it. "Cadbury is not up for sale, but the company would give proper consideration to any offer that valued it properly and would be of interest to shareholders."
That Hershey's might be a player emerged long after the close of business in Britain and there was no comment about the sudden mixing of the company into the ingredients of the confectionery drama.
Ferrero's emergence as a possible partner for Cadbury had been greeted with general warmth in the City, not least because it could help improve the presence of Cadbury on the European sweets market and possibly allow the newly formulated company to remain listed in London. Ferrero's appetite for Cadbury was first reported by Italy's business newspaper Il Sole 24 Ore.
Everything would change, however, if the report, first carried by the Wall Street Journal, is accurate that it has been in talks with Hershey, based in Pennsylvania, to go after Cadbury jointly.
The CEO of Hershey, David West, has been in contact with Ferrero's bankers twice in the last couple of weeks with a view to bidding possibly for Cadbury, sources told the Journal. The paper said that it was unclear how far the company had moved along in crafting such a bid, however, and that it did not seem that specific financial terms had been finalised.
Though it is the largest chocolate maker in the US, Hershey is controlled by the charitable Hershey Trust, which would have to approve a bid before it could be taken forward. Hershey has a long history of going to the altar with other companies after merger agreements and then bailing at the last moment.
Still, a joint insurgency by Ferrero and Hershey for the Cadbury prize would present a serious challenge to Kraft. It won't be unhelpful, meanwhile, that Hershey already has a close relationship with Cadbury, making some of its products for the US market under license.
Hershey shares were down slightly in after-hours trading as news of the possible move circulated in New York last night while American depository receipts for Cadbury rose 10 cents.
There had been some murmurings in the City already that Ferrero alone would not be able to pull off an alternative merger with Cadbury, because of the sheer size of Kraft. Jeremy Batstone-Carr, at Charles Stanley, said any deal between Cadbury and Ferrero "would be along the lines of a joint venture with committed benefits in Europe. We are not talking about serious M&A [merger and acquisition] activity here." He added: "The financial markets are ascribing a low probability to this."
If the road to a possible Ferrero-Hershey bid remains a long one, it is likely to be because of issues regarding which of the companies would get control of the high-revenue gems in the Cadbury crown, namely its Trident chewing-gum business.
Ferrero Rocher: The firm behind the ambassador's favourite
The company behind Ferrero Rocher and Nutella goes back to 1945 when Pietro Ferrero ran a small pastry shop in the Italian town of Alba. At the end of the Second World War the raw materials for chocolate were hard to get hold of and Ferrero started experimenting with locally available ingredients, such as hazelnuts, creating a chocolate and nut paste he named Pasta Gianduja. A year later, the Ferrero company was formed, but in 1949 Pietro died and left his company in the hands of his son, Michele. The Ferrero family still own the company three generations later.
In 1964, Pasta Gianduja was renamed Nutella and the rest is history. In 1982, the company launched Ferrero Rocher hazelnut chocolates, with the memorable television advertisements featuring the ambassador's reception and the line "Monsieur, with these Rocher you're really spoiling us."
Today, Ferrero has a turnover of more than €5bn (£4.5bn). It has 15 production facilities and 31 offices in five continents.Reuse content