Cadbury defiant

Posted on 12 Jan 2010 by The Manufacturer

Birmingham based chocolate maker Cadbury today released its second defence document against the hostile takeover bid from US food conglomerate Kraft.

Kraft has bid $10.5bn for Cadbury, whose shareholders have a deadline of February 2 to accept the offer. Cadbury has repeatedly stated its desire to resist the takeover and remain independent and unions are behind them as they fear job losses through economies of scale if the firm was to become part of a bigger one.

The saga has been playing out since August last year and Kraft’s initial $9.8bn bid was rejected by the Creme Egg maker as ‘derisory’. The latest offer has been met with a similar reaction.

“Don’t let Kraft steal your company with its derisory offer,” said Cadbury chairman Roger Carr. “Kraft’s Offer is even more unattractive today than it was when Kraft made its formal offer in December. Our 2009 performance is ahead of our previously upgraded expectations and we have excellent momentum going into 2010.

“Kraft’s offer is very significantly below all comparable transactions in the sector; applying any of the comparable multiples would imply a price per share far above Kraft’s offer. Over half the offer consideration is in the form of Kraft shares, exposing our shareholders to Kraft’s low growth conglomerate business model, its long history of underperformance and its track record of missed targets.”

The firm is also pointing to its own “outstanding financial performance in 2009” and steady growth predictions for 2010 as a reason for shareholders to reject the bid.

“We generated good revenue growth despite the weakest economic conditions in 80 years,” added the Dairy Milk maker’s CEO, Todd Stitzer. “At the same time, our Vision into Action plan drove a 160 basis point improvement in margin to 13.5% on an actual currency basis, delivering over 70% of our original target in half the time.

“Looking forward to 2010, we are targeting revenue growth within our 5-7% goal range, led by new product innovations across our categories and supported by incremental investment in marketing. We expect benefits from our restructuring and reconfiguration actions in 2010 to drive continued progress to achieve our targets of good mid-teens margin by 2011 and 16-18% margin by 2013.”

Last week Kraft’s biggest shareholder Berkshire Hathaway – the US investment firm fronted by billionaire business mogul Warren Buffet – publicly stated that it would not support a share issuance to raise the money to buy Cadbury and urged other shareholders to do the same until Kraft bcould prove the financial feasibility and astuteness of such a move.

Cadbury will release its full unaudited financial performance for 2009 when UK markets close on Thursday (Jan 14).