Cadbury PLC said Thursday that The Hershey Co. would have to "pay a great price" if it decided to formally wade into the bidding against Kraft Foods Inc. for the British candy maker.
As Cadbury made its final formal defense against Kraft's "derisory" hostile 10.3 billion pound ($16.5 billion) bid by reporting strong 2009 sales growth, Chairman Roger Carr was more amenable about the prospect of a Hershey bid.
Carr said that Hershey had "reaffirmed" its interest in "recent times," but no formal offer has been received "and there may not be" one.
However, he said there was more of a natural understanding between Hershey and Cadbury as two pure play confectionary companies, adding that Hershey would have more to gain from any deal by acquiring Cadbury's international breadth.
"Hershey acquiring Cadbury (would) catapult it overnight into a global business," Carr said on a conference call to analysts and investors. "For a great prize, you have to pay a great price."
Hershey is assembling a bid to acquire Cadbury without the help of Italian candy maker Ferrero International, a person familiar with Hershey's plans told The Associated Press on Wednesday.
Hershey has been working on two parallel bids for Cadbury — one with Ferrero and one on its own. But Ferrero reportedly has withdrawn. Hershey is still crafting its own potential bid, one designed to top Kraft's offer, the person familiar with Hershey said.
The two companies are already partners in international product licenses and share a history of charitable works, but Carr maintained that Cadbury's independence remained its priority, rather than a "white knight" deal with Hershey.
Kraft's CEO Irene Rosenfeld, meanwhile, has been meeting with key Cadbury investors in London over the past two days in an attempt to win favor for a deal that analysts have said doesn't stand a chance if it isn't sweetened.
Kraft, based in Northfield, Illinois, increased the cash portion of its offer last week but not the overall price. It is under pressure from its biggest shareholder, billionaire investor Warren Buffett, not to sweeten its offer with more shares, which he believes are undervalued.
Time is running out for the next step from all the potential players. Under British takeover rules, Kraft has until Jan. 19 to raise its offer, and the deadline for winning acceptances from a majority of Cadbury shareholders is Feb. 2. Hershey has until Jan. 23 to put a formal offer on the table, or walk away for six months.
Cabdury on Thursday reiterated its success as an independent company, reporting 2009 revenue growth and margin improvements ahead of its expectations.
Cadbury said its base revenue grew 5 percent last year, with second half growth of 6 percent on the same basis, as sales growth in emerging markets outpaced developed countries. It said it had improved its trading margin by 1.55 percentage points to 13.5 percent.
"Our performance in 2009 was outstanding," said CEO Todd Stitzer. "We generated good revenue growth despite the weakest economic conditions in 80 years."
Carr said that Kraft's offer "is even more unattractive today than it was when Kraft made its formal offer in December," valuing Cadbury at only 11.9 times 2009 earnings before interest, taxes, depreciation and amortization. Comparable transactions in the sector have ranges from 14.3 to 18.5 times EBITDA.
Cadbury gave details from its 2009 performance review after the close of the London Stock Exchange, where its shares closed 1.2 percent higher at 799 pence on speculation about Hershey's interest.
Chocolate sales growth slowed in the second half, while gum and candy revenue both increased after being unchanged in the first half, Cadbury said in the performance review.
The company's strong presence in emerging markets, which first attracted takeover interest, was underlined. Sales in these markets were up 9 percent over the year, against 2 percent in developed countries.
Sales of chocolate, accounting for almost half of revenues, were up 7 percent, while sales of sweets such as Bassett's Liquorice Allsorts were up 5 percent.
Cadbury said earlier this week it would pay dividends totaling 18 pence per share for 2009, a 10 percent increase from 2008.
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