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
ebooksA special investigation by Andy McSmith
  • Get to the point
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: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own