The company’s defence document against the 727p cash-and-shares offer contained a unequivocal message for shareholders – that the bid was “contemptuous” and must be rejected by shareholders.
Chief executive Todd Stitzer quoted one of the founding fathers of the United States, Thomas Paine, to bring home his point. “What we obtain too cheap, we esteem too lightly.”
Cadbury chairman Roger Carr said the board was not “wrapping itself in a Union Jack” by turning down the American bid. “This is about value and only value,” Carr said.
“While Kraft needs Cadbury, Cadbury does not need Kraft,” said Carr, saying there was no operational, financial or strategic benefit for Cadbury in combining with Kraft.
The company yesterday confirmed that two other parties are mulling rival offers for Cadbury. US rival Hershey and Italian chocolatier Ferrero have stated their interest but Cadbury yesterday said it had not yet received proposals from them.
“We have told them what the rules of the game are. Until they come forward with something that meets our criteria for value, there is no point getting in to conversations with them,” Carr said.
Cadbury yesterday laid out a number of targets to help put shareholders off the Kraft offer, including better organic growth, improved margins, higher returns on capital and double-digit growth in dividends.
IS CADBURY DOING THE RIGHT THING BY REFUSING KRAFT’S OFFER?
JEREMY BATSTONE-CARR | CHARLES STANLEY
We will be raising our estimates for Cadbury in the wake of this robust defence. We have consistently argued that Kraft will have to raise its offer aggressively, probably to 850p per share or more if it wishes to acquire the business. We are unconvinced regarding Kraft’s ability to go to that level.
GRAHAM JONES | PANMURE GORDON
Cadbury’s defence document contains few surprises and, in our view, sets out credible objectives through to 2013. Our price model points to an implied target price of 1064p, and the question we see is how much of a discount would Cadbury’s shareholders accept to eliminate the execution risk.
ALEX MOLLOY | CREDIT SUISSE
It seems to us that with these organic opportunities Cadbury is making a robust case for its continued independence. Kraft, we continue to believe, will have to pay a 30 per cent premium to the underlying value of the business, so something like 850p+ to win the day. Its current offer is worth only 727p. It has a long way to go.