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."

PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
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

Reach Volunteering: Trustee – PR& Marketing, Social Care, Commercial skills

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...

Reach Volunteering: Charity Treasurer

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...

SThree: Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

Ampersand Consulting LLP: Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible
Look what's mushrooming now! Meat-free recipes and food scandals help one growing sector

Look what's mushrooming now!

Meat-free recipes and food scandals help one growing sector
Neil Findlay is more a pink shrimp than a red firebrand

More a pink shrimp than a red firebrand

The vilification of the potential Scottish Labour leader Neil Findlay shows how one-note politics is today, says DJ Taylor
Bill Granger recipes: Tenderstem broccoli omelette; Fried eggs with Mexican-style tomato and chilli sauce; Pan-fried cavolo nero with soft-boiled egg

Oeuf quake

Bill Granger's cracking egg recipes
Terry Venables: Wayne Rooney is roaring again and the world knows that England are back

Terry Venables column

Wayne Rooney is roaring again and the world knows that England are back
Michael Calvin: Abject leadership is allowing football’s age-old sores to fester

Abject leadership is allowing football’s age-old sores to fester

Those at the top are allowing the same issues to go unchallenged, says Michael Calvin