Kraft went public about its bid last week in an effort to “encourage and further” the acquisition process, and has followed up its offer with aggressive public comments.
Cadbury chairman Roger Carr has now written to Kraft CEO Irene Rosenfeld to respond to these statements and elaborate on its rejection statement.
Carr said that the original offer “fundamentally undervalues” Cadbury. Kraft has already come out in defense of the size of its bid, with executive VP for strategy Michael Osanloo saying “the simple fact is that Cadbury is worth what someone is willing to pay for it – nothing more.”
But Cadbury and many analysts disagree. Supporting the argument that the current offer is too low, Carr went on to describe Cadbury as “a business of inherent value, impossible to replicate and with a unique position in the global confectionery market”.
Bernstein analyst Andrew Wood said Cadbury believes Kraft needs to significantly increase its bid in order to appropriately engage with Cadbury. Wood added: “We agree and consider that the proposed bid fundamentally undervalues Cadbury.”
As well as attacking the size of the Kraft bid, Carr, in his letter to the Kraft management, also hit out at the business credentials of its suitor.
The Cadbury chairman said: “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.”
In a note to investors, Wood said such strong language is probably a result of the Kraft decision to go public with its offer, and defend the amount aggressively in the media, instead of engaging in a longer, more constructive dialogue with Cadbury.
The quote also touches on another repeated message in the letter – the belief at Cadbury in the prospects of the company as an independent business.
In sharp contrast Kraft CEO Rosenfeld said last week that a stand-alone Cadbury has "limited opportunities for value creation".
But despite the keen defense of the independent prospects of Cadbury, Wood said management does not seem to be blindly pursuing a stand-alone strategy without consideration of shareholder value.
The analyst drew this conculsion from the comment in the Carr letter that shareholder value is at the top of the agenda. He said: “An appropriate bid will be appropriately considered.”