Cadbury Chairman Rejects ‘Low-Growth’ Kraft’s ‘Unappealing’ Bid

Cadbury Chairman Rejects ‘Low-Growth’ Kraft’s ‘Unappealing’ Bid


Sept. 13 (Bloomberg) -- Cadbury Plc, the world’s second- biggest confectionery company, said an unsolicited takeover offer from Kraft Foods Inc. is an “unappealing prospect” due to its rival’s business model and “lower growth” prospects.

Kraft’s cash and stock offer, worth 9.6 billion pounds ($16 billion) at the Sept. 11 closing price, “fundamentally fails to reflect the current value of Cadbury as a standalone business,” Cadbury Chairman Roger Carr said in a letter to Kraft Chief Executive Officer Irene Rosenfeld posted on the company’s Web site yesterday.

“Under your proposal, Cadbury would be absorbed into Kraft’s low growth, conglomerate business model, an unappealing prospect which contrasts sharply with our strategy to be a pure- play confectionery company,” Carr said in the letter dated yesterday. Kraft is “a company with a considerably less focused business mix and historically lower growth,” he wrote.

The value of Kraft’s offer has fallen from 10.2 billion pounds when it was announced on Sept. 7, as investors sold the company’s stock last week. London-based Cadbury, halfway through a four-year drive to increase profitability, said shareholders will receive “optimum value” by sticking with its focus on the faster-growing confectionery market.

Kraft has a market value of $38.5 billion after its shares fell 7.1 percent last week. Cadbury is worth 11.4 billion pounds after its shared surged 37 percent this past week to 775.5 pence following Kraft’s approach. The price tag for Cadbury, the maker of Dairy Milk chocolate and Trident chewing gum, may reach 937 pence per share for the successful bidder according to the average estimate of six analysts surveyed by Bloomberg.

‘Uncertain Value’

“The proposal is of uncertain value for Cadbury shareholders as underlined by the movement in the Kraft share price since your announcement,” Carr wrote.

Rosenfeld has led acquisitions including the $7.8 billion purchase of Paris-based Groupe Danone SA’s cookie unit to reshape the world’s second-biggest food company through international growth. Kraft is based in Northfield, Illinois.

Rosenfeld will speak at the University of Toronto on “Leading Transformational Change” later today, according to the Rotman School of Management’s Web site. Cadbury Chief Executive Officer Todd Stitzer is speaking at a Sanford C. Bernstein analyst conference in London on Wednesday, Sept. 16, where according to the Financial Times, he’ll lay out his strategy to keep the company independent.

Cadbury investors including Mario Gabelli, who runs Rye, New-York-based Gamco Asset Management Inc., said she’ll have to improve her offer to win their support

Raise Offer?

Lisa Gibbons, Kraft’s director of communications, declined to comment on the letter or confirm its receipt.

Cadbury’s four-year restructuring aims to increase the operating margin, a gauge of profitability, to a “mid-teens” percentage from 10 percent in June 2007. Under the program Stitzer plans to close 15 percent of all factories and cull staff globally.

The company has “a clear set of targets” and “a track record of delivery accepted by the market,” Carr said. “We have the scale, capabilities and resource to deliver on our commitments to shareholders.”

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