The request by Cadbury seemed designed to put pressure on Kraft to raise its $16.7 billion bid for the British confectionery group two weeks after making public its takeover proposal, the report said.
People familiar with the matter told the newspaper that Cadbury asked the U.K. Panel on [image-nocss] Takeovers & Mergers to issue an order demanding that Kraft make a formal bid with committed financing. Takeover targets frequently solicit the panel's help to limit potential damage to their business arising from the uncertainty surrounding a possible bid, and to reduce the distraction for their management.
Cadbury CEO Todd Stitzer struck a more conciliatory tone in an interview Monday with the Journal. "I would never say there's not some strategic sense in these businesses coming together," he told the paper. In Europe, Brazil, Russia and China, Stitzer said, "there are clear combinations of either routes to market or complementary elements of the confectionery portfolio."
In an open letter to Kraft earlier this month, the British confectionery group called a tie-up of the companies "an unappealing prospect which contrasts sharply with our strategy."
In Monday's interview, Stitzer said Cadbury shareholders oppose the deal at the price currently proposed by Kraft and want Cadbury to concentrate on its operations unless Kraft makes a higher offer.
"Their view is, keep doing what you're doing, and in the absence of any higher value, stay focused," Stitzer said. "If a higher bid does not materialize, I think our shareowners will have to decide whether or not the value of our plan or the value of whatever offer's on the table is appropriate."
Lisa Gibbons, a Kraft spokesperson, said in a statement, "We have clearly outlined our strategic rationale for a possible combination with Cadbury." She declined to comment further, said the report.
Stitzer said that, under his plan, Cadbury has a promising future as an independent company and could overtake Mars Inc. as the world's biggest confectionery company through organic growth and targeted acquisitions in the next three to five years. Mars dethroned Cadbury as the world's largest sweets company last year when it bought U.S. chewing-gum maker Wm. Wrigley Jr. Co.
"I completely respect the fact that we would be attractive to someone else, but the world of large conglomerates has passed," he said. "Shareowners recognize that focused businesses, and focused in an area that has commercial and operational synergies, is a very good space to be."
By buying individual confectionery brands, Stitzer said Cadbury has tried to grow bigger within the category, rather than by teaming up with a bigger food company. "I think scale works to a [point]," he said. "There's a confectionery buyer in retailers, and I think you can focus on that buyer, and if you can offer chocolate, gum and candy, I think that's an advantage. What more can you offer to the confectionery buyer in the grocery store? They don't necessarily and are not generally responsible for anything but confectionery."
Combining Kraft and Cadbury, the U.S. food maker has said, would create a "global powerhouse" with $50 billion in revenue and a dominant role in some of the world's biggest and fastest-growing confectionery markets, with potential for substantial savings.
So far, no other company has entered the fray. U.S. chocolate maker Hershey Co. has hired several advisers to help it assess a potential bid, people familiar with the matter told the Journal.
In the past, Hershey was an attractive partner to Stitzer because, like Cadbury, it is a sweets-only company, whereas Kraft also makes food products such as packaged macaroni and cheese and mayonnaise. Hershey and Cadbury executives discussed a merger in 2007, the report said, but the conversations never led to a deal.
Analysts have long noted the complementary nature of Kraft's and Cadbury's businesses, said the report. While Cadbury has a strong presence in the large British and Indian markets, as well as other Commonwealth countries, and has a strong chewing-gum business in Latin America, Kraft has a sizable chocolate business in Europe and Latin America, with brands such as Milka, Toblerone, Lacta and Cote d'Or.
(Click here for previous CSP Daily News coverage.)
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