Cadbury says Kraft is “fundamentally unattractive”

Cadbury has stressed that Kraft’s offer to take over the confectioner “remains fundamentally unattractive” in its second response document.

The UK confectioner says its financial performance last year was well ahead of market expectations and it had “excellent momentum going into 2010”. It claims that Kraft’s offer fails to recognise this and “remains derisory”.

Roger Carr, chairman of Cadbury, says: “Kraft’s Offer is even more unattractive today than it was when Kraft made its formal offer in December. Our 2009 performance is ahead of our previously upgraded expectations and we have excellent momentum going into 2010.”

“Kraft’s offer is very significantly below all comparable transactions in the sector; applying any of the comparable multiples would imply a price per share far above Kraft’s offer. Over half the offer consideration is in the form of Kraft shares, exposing our shareholders to Kraft’s low growth conglomerate business model, its long history of underperformance and its track record of missed targets. Don’t let Kraft steal your company with its derisory offer.”

Cadbury will not report financial details until Kraft has submitted its revised offer for the company on Thursday (January 17). It says that 2009 performance was “well ahead of market expectations” and they had a “strong second half performance” which “provides the foundation for our enhanced long-term targets.”

It adds that it “believes that Cadbury’s standalone value has risen further” since the initial approach and claims that Kraft has an “unattractive business model and poor track record of delivery”. It adds the US food giant is “an unfocused, conglomerate business model with significant exposure to lower growth categories and a track record of missed financial targets.”

Kraft’s current bid was made in December, valuing the UK confectioner at £10.1bn ($16.8bn).

It is set to revise the terms of its takeover bid for Cadbury this week and says it will increase its price per share by 60p, though the overall value of the offer is not being increased. Nestlé has also walked away from launching any potential bid for its rival confectioner.

Cadbury said this was an attempt “to buy Cadbury on the cheap”. It has been pursuing the UK company since September last year.

Hershey and Ferrero have also indicated that they are considering making offers for Cadbury, though they have yet to post formal bids. According to various reports, Ferrero has now applied for a sizeable loan to make a bid for Cadbury.

Kraft’s raised bid comes as new independent directors with considerable brand building and marketing experience join its board of executives. Heineken’s chief executive Jean-Francois van Boxmeer and former chairman of retailer VF, Mackey McDonald, joined its board of directors on 1 January.

Daryl Fielding, the former Ogilvy & Mather executive and prime architect of the Dove Real Women campaign, also joins the company as its new European vice-president of marketing this month.

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