Cadbury has issued its second formal rebuttal of the hostile £10bn bid from US food company Kraft: in its latest defence document, the UK chocolate-maker insists that Kraft’s original offer was far too low relative to previous deals in the sector, and that Cadbury’s performance since then justifies an even higher price. It hasn’t actually included any updated financials – these will apparently follow later this week (so it’ll be a busy few days for the accountants). But once again, it’s made its antipathy pretty clear. Kraft CEO Irene Rosenfeld is going to have to go some on her upcoming UK charm offensive...
Without any new numbers, Cadbury’s latest ‘response document’ is actually pretty similar to its previous one – chairman Roger Carr even recycles his best quote (‘Don't let Kraft steal your company with its derisory offer’). It starts by pointing out that Kraft’s offer values Cadbury at a measly 12 times 2009 EBITDA, whereas most recent deals in the sector have been pitched somewhere between 14 and 18 times earnings. Even Kraft’s usual benchmark is 14 times, it says. And although Kraft may have sweetened the cash bit of its offer, the bulk of it is still in shares; according to Carr, this would mean ‘exposing our shareholders to Kraft's low growth conglomerate business model, its long history of underperformance and its track record of missed targets.’ Ouch. Don’t pull your punches, Roger.
And that wasn’t all. Cadbury also insists that it’s worth more now than it was back in September. For a start, global share prices have risen, particularly in this sector (although to be fair, that’s partly due to all this takeover speculation). Meanwhile Cadbury itself has been outstripping its financial forecasts, according to CEO Todd Stitzer. He repeated all the numbers he bandied around last time – revenues up 5%, margin up to 13.5% (possibly hitting 16-18% by 2013) and double-digit divi growth – although Kraft will argue that there’s still not much detail on exactly where these extra savings will come from. (And, possibly, ask why they haven’t been made already…)
To be honest, there’s not a great deal of extra juice in here, at least until the new numbers are released on Friday. But one thing’s for sure: Cadbury’s hostility towards Kraft remains entirely undimmed. In fact, its defence has been so vigorous that it’s increasingly hard to imagine the two companies ever working together. Either way, the ball is back in the court of Kraft boss Irene Rosenfeld, who the Times reckons is in the UK this week trying to woo Cadbury’s biggest shareholders. Since two of them have apparently refused to even meet her unless she hikes her offer (much to Carr’s delight, presumably), she’s going to have her work cut out...
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