Kraft and Cadbury trade blows over £10bn offer

Kraft hints that it will not raise offer price beyond its formal bid last month

The war of words between Cadbury and Kraft escalated yesterday, following the Dairy Milk maker's fierce defence on Monday against the US food giant's £10bn hostile bid.

Kraft's chief executive, Irene Rosenfeld, also strongly hinted that it would not raise its offer price by vowing to "continue to maintain a disciplined approach" towards the acquisition.

The maker of Oreo cookies raised a series of questions over the upgraded targets – notably on margin, cash flow and revenue growth – trumpeted by Cadbury two days ago, as well as lambasting the lack of information on its prospects for 2010, such as on earnings. Ms Rosenfeld said: "We have heard nothing from Cadbury that surprises us."

Kraft reiterated that the offer price, which valued Cadbury at 728p a share, or £10bn, yesterday, represented a substantial premium to the unaffected share price of the Creme Egg maker before City speculation emerged in the summer. Kraft went hostile with an unchanged offer of 0.2589 of its own shares and 300p in cash for each Cadbury share last month. Owing to share price and currency fluctuations, this was below Kraft's 745p a share approach on 7 September. Cadbury shares closed at791.5p.

A Cadbury spokesman said: "Kraft seem to have run out of ideas. Neither our shareholders nor the market as a whole seem to have had any problems understanding the detail in our business plan or the defence we presented yesterday."

He added: "No smoke and mirrors will change the fact that Kraft's offer remains derisory. We will continue to communicate directly with our shareholders about the significant value in their business as we have throughout this unwelcome approach."

Cadbury shareholders have until 2 February to decide whether to accept Kraft's offer. In addition to double-digit dividend growth, Cadbury upgraded its guidance on revenue growth, operating margins and cash flow from 2010 to 2013. But Kraft said that Cadbury's had "never before achieved" these long-term targets. For the three-year period, Cadbury forecast revenue growth of between 5 per cent and 7 per cent a year, compared with guidance of 5 per cent for this year.

Kraft urged shareholders to question what price rises – in a low-inflation environment – Cadbury was assuming, given that its revenue growth in the first three quarters of 2009 was driven by price hikes and a greater proportion of higher-priced products in its mix.

The British confectioner also forecast operating margins of between 16 per cent and 18 per cent by 2013, ahead of plans to deliver "mid-teen" margins by 2011. But Kraft queried how it could hit these targets with only a 25 to 50 basis point improvement coming from business efficiencies, implying further restructuring from its Vision into Action programme. Nicolas Ceron, an analyst at Numis, said: "We believe the opportunity to cut costs, notably by closing factories, remains high within the business and hence are convinced that this is an achievable [margin] target."

Kraft also said that input costs, such as cocoa, are expected to "remain high", and questioned why Cadbury had not provided guidance on input costs into next year on Monday.

Jeremy Batstone-Carr, at Charles Stanley, said that Cadbury had provided "considerable detail" in its defence document and that it can comfortably address Kraft's arguments. For instance, he explained that the maker of Green & Black's raised revenue targets are predicated on continued strong growth in emerging markets, including Brazil and India, which have delivered growth of about 12 per cent a year over the last two years.

On Monday, Cadbury said unnamed rival suitors – believed to include the US confectionery firm Hershey – have expressed an interest in a tie-up, but have not yet come up with a "fully financed" offer. Hershey and Ferrero, the Italian maker of Rocher, are considering their positions regarding Cadbury.

The board of Cadbury is thought to be willing to engage with Kraft at a price above 800p. But Mr Batstone-Carr said: "In the absence of a rival offer... we believe that the prevailing balance of probability strongly favours Cadbury's continued independence."

Start your day with The Independent, sign up for daily news emails
i100 In this video, the late actor Leonard Nimoy explains how he decided to use the gesture for his character
Arts and Entertainment
Secrets of JK Rowling's Harry Potter workings have been revealed in a new bibliography
arts + ents
Down-to-earth: Winstone isn't one for considering his 'legacy'
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower