London: Britain’s Cadbury showcased robust 2009 results and an upbeat outlook on Tuesday in its last move to rebuff US food giant Kraft Foods’ £10.5 billion ($17 billion) hostile takeover bid.
Analysts said the strong trading was generally positive for Cadbury’s valuation and Kraft needed to come back with a higher offer over the next seven days of the bid timetable to succeed.
“We continue to think that Kraft will need to come up with an offer north of £8 and with a significantly enhanced cash component to take over Cadbury,” said analyst Martin Deboo at broker Investec Securities.
In a final defence document, the Dairy Milk chocolate and Trident gum maker said Kraft’s “derisory” offer valued it lower than any comparable deal in the sector and that its standalone value had risen since the Kraft bid emerged last September.
“Today, the view of the Kraft offer is pretty universal, and derisory is not an unreasonable view,” Cadbury chairman Roger Carr told a conference call.
He added the choice for shareholders is between the excellent track record of Cadbury’s management and Kraft’s management which he said had overpromised and under delivered.
Cadbury has been fighting off Kraft’s cash and share bid, currently worth 762pence a share, since early September, with investors and analysts saying a winning bid needs to be 800pence or above. Cadbury shares were unchanged at 781pence by 0942 GMT.
“We suspect that an increased offer in the range of 825-850pence could well be sufficient to clinch the deal,” said analyst Graham Jones at brokers Panmure Gordon.
Kraft now has until 19 January to change its bid while Cadbury shareholders have until 2 February to accept.
Cadbury says Kraft’s offer values it at a lowly 12 times 2009 core EDITDA profits, and the majority of the offer is in Kraft shares which have underperformed its rivals by 42% since Kraft’s flotation in June 2001.
Cadbury said its 2009 underlying sales rose 5% with the second half accelerating to 6%. It achieved an operating margin of 13.5% against a previous forecast of 13.3% and said its 2009 dividend would rise 10%.
“Our performance in 2009 was outstanding. We generated good revenue growth despite the weakest economic conditions in 80 years,” CEO Todd Stitzer said.
Stitzer and Carr in dismissing Kraft’s offer have questioned the ability of Kraft CEO Irene Rosenfeld to raise her bid after Kraft’s top shareholder Warren Buffett last week warned the company not to overpay and issue too many new Kraft shares.
They are confident of meeting Cadbury’s longer-term targets which include annual sales growth of 5-7% from 2010, lifting operating margins to 16-18% by 2013 and achieving double-digit dividend growth for 2010 and beyond.
Meanwhile, some Cadbury shareholders have rejected a meeting with Kraft’s Rosenfeld, with Cadbury’s Carr saying that he was amazed it had taken Kraft so long the reach out to them.
“I do understand some are (meeting them) and some have rejected a meeting from Kraft, Carr said.
Last week, Swiss food group Nestle ruled itself out of a Cadbury auction. Sources told Reuters on Monday that Italian chocolate maker Ferrero was very close to deciding on whether to make a counterbid in tandem with US giant Hershey.
Cadbury’s labour union was set to warn British lawmakers on Tuesday that a potential bidding war for the confectioner would undermine workers’ rights.