Cadbury Makes Efforts to Sour Kraft Confectionery Bid

Cadbury increased its stance against the takeover bid by Kraft, publishing its second response document that aims to prove Kraft’s proposal will be bad for the UK-based company.

The release highlight’s Cadbury’s strong financial performance for 2009, and comes amid public concern in the UK that a deal could lead to major job losses.

The Guardian newspaper quoted business analysts and MPs who feared the cultural differences between the businesses could be too great for a takeover to be successful, although a merger could be more fruitful.

The newspaper quoted Chris Bones, dean of Henley business school, as saying “Having worked for one company, and looked very hard at the other, their cultures are so different and their ways of operating are so different that this cannot be anything but a potential disaster more than it can be a potential success – whatever price Kraft pays.”

Cadbury once again said in its release that its board unanimously rejected Kraft’s most recent offer and recommended shareholders take no action on the Kraft bid.

It estimated its financial performance in 2009 as being above market expectations with a trading margin of 13.5%, full year dividend growth of 10% and a 5% growth in base revenue.

It has predicted strong demand will drive growth by 6% for the second half of 2009 and said it had no fears about meeting its 5-7% growth through investment target.

Cadbury CEO Todd Stitzer regarded Cadbury’s growth in 2009 as outstanding.

“We generated good revenue growth despite the weakest economic conditions in 80 years,” Stitzer said.

“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.”

Cadbury said Kraft’s offer of £10bn for Cadbury in a cash-and-share deal, partly financed by a $9bn bridging loan, valued the company at only 12 times the 2009 EBITDA, a discount to Kraft’s own 14 times EBITDA.

It also criticised Kraft’s business acumen, saying the company had “an unattractive business model and poor track record of delivery”.