New York: Cadbury Plc executives are finding that a significant number of major shareholders do not believe Kraft’s hostile takeover bid reflects the British chocolatier’s stand-alone value, Cadbury’s CEO said on Friday.
Cadbury chief Todd Stitzer told Reuters in an interview that “it appears that the stand-alone value of the company has risen in the eyes of shareholders” since the company posted a defense to Kraft’s $16.2 billion (£10 billion) bid earlier this week.
“They seem to be unimpressed by the current level of the Kraft offer as compared to our stand-alone value,” he said.
Stitzer was in New York to hold talks with major Cadbury investors and analysts, as executives on both sides of the Atlantic aimed to shore up the company’s promise of improved growth and margins in the face of Kraft’s takeover effort.
At least one investor present at a meeting with UK shareholders said Cadbury also expressed its concern about the growing stakes being built up in the company by arbitrageurs.
“We remain convinced that Cadbury is worth far more than the current share price,” the investor told Reuters.
Kraft made its cash and shares offer for Cadbury public on 7 September, with the current value of the bid at about 730 pence.
Cadbury’s shares closed just above 790 pence on Friday, partly held aloft by hopes that another bidder will enter the fray. Some investors and analysts say Kraft would need to raise its offer to around 820-850p to seal a deal.
Hershey Co and Italy’s Ferrero have said they were contemplating bids, and some analysts believe that a joint bid from the two would involve splitting Cadbury’s chocolate business from its candy and gum operations.
Stitzer said that Cadbury had received “interesting, I would say unique, approaches” from potential suitors, but had not been presented with that particular scenario.
“I don’t think there’s anything to really share because there’s been nothing of compelling value in the context of our judgment that is worth sharing with shareowners,” he said.
Kraft stood by the value of its bid.
“Clearly, shareholders need to make up their own minds, but we remain convinced that our offer provides immediate value and significant longer-term potential upside,” Kraft spokeswoman Perry Yeatman said when asked for comment on Stitzer’s remarks.
Cadbury to convey more to investors
Stitzer said that Cadbury intended to communicate again with investors in time for a 12 January deadline set by the UK Takeover Panel to convey additional information about its performance in 2009.
It will be very difficult for the company to present a forecast for 2010 due to Takeover Panel rules, he said, adding that some details about 2010 may be made available.
Stitzer said that Cadbury had not had direct talks with Kraft since the US food maker’s CEO Irene Rosenfeld initially approached the company in late August about a potential deal. While Cadbury has rejected the offer as derisory, Kraft has refused so far to offer a sweetener.
“I think there are different, more elegant and subtle ways to approach a conversation like this,” Stitzer said of Kraft’s approach.
On Monday, Cadbury raised its underlying annual sales growth target to between 5 and 7% from its previous 4 to 6% range. It sees operating margins by 2013 in a range of 16 to 18% after looking for good mid-teens margins by 2011, compared with 11.9% in 2008.
According to a timeline dictated by UK takeover rules, Cadbury has until 12 January to update investors and Kraft has until 19 January to raise its offer further. Cadbury shareholders have until 2 February to respond to the Kraft offer.
On Friday, Kraft said it would hold a shareholder meeting on 1 February, seeking approval to issue up to 370 million new shares as part of the bid.