Kraft Foods Wants Cadbury: Confectioner Not Too Sweet on Deal

On Monday, Kraft Foods rolled out a bid (cash and shares) to acquire Cadbury, the British confectioner.

According to an article in Reuters, if these companies strike an agreement (and right now that is a big "if"), the acquisition will yield "the world's largest confectioner."

The new mélange will market Dairy Milk Chocolate and Trident gum (from Cadbury's portfolio) and Toblerone chocolate, Oreos, and Philadelphia cream cheese (from Kraft's portfolio), just to name a few sweet treats.

Kraft's offer to Cadbury shareholders was valued at 745 pence per share ($17 billion US dollars): an impressive sum, but it seems like it'll take more than money for Cadbury to agree to a sale.

Reuters stated that Cadbury Chairman, Roger Carr, was not the least bit enchanted.

In a letter to Kraft, Carr rejected the offer, and relayed sentiments that it undervalued Cadbury.

"Under your proposal, Cadbury would be absorbed into Kraft's low growth, conglomerate business model, an unappealing prospect which contrasts sharply with our strategy to be a pure play confectionery company."

Cadbury prides itself on its focused business model as a confectioner. Carr reinforced that an acquisition by Kraft would result in a business structure contrary to that of the Cadbury ideal... more like a "jack of all trades" model.

Carr also expressed apprehension about the value of Kraft shares that would be exchanged (330 pounds and 0.2589 new Kraft shares for every one Cadbury share) as part of the terms. Kraft share prices have dropped this week in conjunction with the value of the US dollar (especially compared to the British pound).

Despite Cadbury's initial dismissal, talks are still in progress.

According to Reuters, many analysts anticipate that Kraft will sweeten the deal, either with more cash or higher bid prices.

Aaah, just imagine owning all of that chocolate... and, if a transaction occurs between these two giants, imagine the wholesale sugar, wholesale salt, and wholesale food ingredient sales that will result!