Hershey (HSY) Likes Cadbury (CBY), But Likely Can't Afford It
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It is not likely that Hershey (NYSE: HSY) will submit a bid for Cadbury PLC (NYSE: CBY) as it is unable to arrange the proper financing, according to the WSJ. Cadbury is the subject of a takeover offer from Kraft Foods (NYSE: KFT).
Hershey executives have been considering countermoves since Kraft made its offer public for Cadbury in early September. Thus far, Hershey has no financing or strategic plan for a bid. Hershey is likely struggling with coming up with a competitive bid because its $5 billion in annual revenue is too small to support the debt service needed to make a competitive offer. Hershey realizes it is "several billion short of matching the current offer," reported the WSJ.
The pressure on Hershey and Kraft increased this week as the U.K. Panel on Takeovers and Mergers ordered Kraft to make a formal bid for Cadbury by November 9th or go away. Cadbury Chairman Roger Carr said that the authority's decision creates "clarity and certainty" for Cadbury's shareholders "at the earliest opportunity." The U.K. Panel's ruling sets a six-week deadline for Kraft to formalize and attain propering financing for its bid.
A Kraft-Cadbury combination has negative implications for Hershey. Hershey's sales occur mostly in the slow-growing U.S. confectionery market, and Cadbury's acquisition would eliminate a major avenue for Hershey to expand international sales. Hershey also would encounter tougher competition in the consolidating candy-and-gum industry.
Hershey has hired four advisers to help it further explore making a competing offer for Cadbury.
Hershey executives have been considering countermoves since Kraft made its offer public for Cadbury in early September. Thus far, Hershey has no financing or strategic plan for a bid. Hershey is likely struggling with coming up with a competitive bid because its $5 billion in annual revenue is too small to support the debt service needed to make a competitive offer. Hershey realizes it is "several billion short of matching the current offer," reported the WSJ.
The pressure on Hershey and Kraft increased this week as the U.K. Panel on Takeovers and Mergers ordered Kraft to make a formal bid for Cadbury by November 9th or go away. Cadbury Chairman Roger Carr said that the authority's decision creates "clarity and certainty" for Cadbury's shareholders "at the earliest opportunity." The U.K. Panel's ruling sets a six-week deadline for Kraft to formalize and attain propering financing for its bid.
A Kraft-Cadbury combination has negative implications for Hershey. Hershey's sales occur mostly in the slow-growing U.S. confectionery market, and Cadbury's acquisition would eliminate a major avenue for Hershey to expand international sales. Hershey also would encounter tougher competition in the consolidating candy-and-gum industry.
Hershey has hired four advisers to help it further explore making a competing offer for Cadbury.
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