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."

Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Life and Style
A binge is classed as four or more alcoholic drinks for women and five or more for men, consumed over a roughly two-hour period
tech
News
Detail of the dress made entirely of loom bands
news
Life and Style
More than half of young adults have engaged in 'unwanted but consensual sexting with a committed partner,' according to research
techResearchers recover 100s of nude photos from second-hand smartphones
PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
Sport
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Account Management Strategy Manager

£38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice