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Cadbury tells Kraft to bid or back off

By Caroline Scott-Thomas , 24-Sep-2009

Cadbury has approached the UK’s Takeover Panel, asking it to impose a deadline for Kraft to make an offer.

Companies that are targeted for takeover frequently approach the Takeover Panel in order to limit potential damage and minimize distraction for management. The panel normally sets a deadline of about a month, and if an offer is not forthcoming, any talk of takeover would be put off for at least six months.

However, sources close to the matter have reportedly said that the panel could make a decision within the next week.

It has been just two weeks since Cadbury turned down Kraft’s offer of £7.45 ($12.06) per share – which values Cadbury at about $16.4bn – and since then rumors have been rife about rival suitors for the British confectionery giant. Now, Cadbury shares are lingering around £7.90 ($12.80) and analysts have suggested that Cadbury may be worried that this premium could shrink if talks about a potential takeover drag on.

Stitzer softening?

Meanwhile, in a closed conference with investors on Tuesday, Merrill Lynch/Bank of America sales specialist Simon Archer said he spoke with Cadbury CEO Todd Stitzer.

Although Cadbury has yet to make his comments public, Archer published a note which said: "Todd admitted that there is some strategic sense in combining the two companies and he doesn't expect Kraft to walk away, so he said his job is to get as much value as possible.”

And speaking with The Wall Street Journal this week, Stitzer said: “I would never say there's not some strategic sense in these businesses coming together,” and spoke of the “complementary elements” of the two companies.

The Wall Street Journal has interpreted these comments as meaning he has “softened” on the idea of a Kraft takeover, while analysts have said that the chance of other offers, from the likes of Hershey or Nestle, are becoming less likely as time passes.

In an open letter to Kraft earlier this month, Cadbury chairman Roger Carr said the bid was “unattractive and fundamentally undervalues Cadbury.”

The letter went on to say: “Under your proposal, Cadbury would be absorbed into Kraft’s low growth, conglomerate business model, an unappealing prospect which contrasts sharply with our strategy.”

Archer also said in his note that Kraft CEO Irene Rosenfeld, speaking at the same conference as Stitzer on Tuesday, called Cadbury “quite a compelling opportunity but not at any price.”

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