10 September 2009

Cadbury spurns Kraft, for now

In the grand scheme of things, $16.7 billion is a pretty sweet deal, but British candy maker Cadbury PLC is looking for more sugar from Kraft Foods Inc.

Cadbury is not saying they will not sell to Northfield, Ill.-based Kraft, or any other suitor, like Nestle or Hershey, they just need more money.

Cadbury, the second-largest global candy maker with brands like Trident, Dentyne, and Cadbury Creme Eggs, quickly rejected the surprise offer by Kraft Foods, saying it fundamentally undervalues the company. But Kraft Chief Executive Irene Rosenfeld said the offer is a good deal.

Cadbury’s rejection of the bid, however, opens the door to discussions with others.

Kraft, the world’s second-largest foodmaker with brands like Ritz, Oreos, and Toblerone chocolate, said it plans to continue discussions with Cadbury and will try to keep the efforts “friendly.” Rosenfeld said she believes Cadbury will realize the value of the offer in the coming weeks.

A Kraft-Cadbury combination would become a global food giant with more than $50 billion in combined revenue.

Cadbury would have access to Kraft’s strong position in North America and benefits of size. Kraft estimates annual cost savings of $625 million stemming from a potential acquisition on top of both company’s spending initiatives.

A deal would also help Kraft expand its global presence with access to Cadbury’s more diverse business, including its strong foothold in developing countries like India and Mexico.

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