Hershey, Ferrero “considering options” on possible Cadbury bid

HARRISBURG, Pa. — Hershey, hoping to expand its overseas presence, has lined up a potential partner as the most recognizable name in American chocolate considers starting a bidding war for British candy maker Cadbury PLC.

The Cadbury offices

HARRISBURG, Pa. — Hershey, hoping to expand its overseas presence, has lined up a potential partner as the most recognizable name in American chocolate considers starting a bidding war for British candy maker Cadbury PLC.

Italian candymaker Ferrero International SA could give The Hershey Co. the financial firepower to top a $16.4 billion hostile bid by Kraft Foods Inc.

Hershey (NYSE:HSY) and Ferrero said Wednesday they are considering a possible offer for Cadbury.

“Hershey confirms that it is reviewing its options and at this stage there can be no assurance that any proposal or offer from Hershey will be forthcoming,” the company said in an announcement to the London Stock Exchange on Wednesday. Ferrero, which makes Nutella chocolate spread and Tic Tacs, posted a similar statement.

Some analysts consider the pair a dark horse.

“The fact that they (Kraft) are alone and have the cash, that’s why I think their bargaining power is greater, the ability to upbid is greater and their ability to pay for it is much greater than Hershey,” Frost&Sullivan analyst Christopher Shanahan said Wednesday.

BMO Capital Markets analyst Kenneth Zaslow said Cadbury, with its strong international portfolio, would be more important to Hershey’s long-term success than to that of Kraft.

“Hershey’s long-term growth rate is limited by the inability of its product to travel far beyond the U.S. borders,” Zaslow wrote in a note to investors.

Cadbury said it will consider any serious offer that delivers full value for the company. That would mean more than Kraft’s bid, announced Nov. 9, which it dismissed as “derisory.” Now that Kraft may have competition, analysts say the price for Cadbury is likely to go higher.

Kraft (NYSE:KFT) said its next step remains the same, to send an offer document to Cadbury shareholders by Dec. 7.

Kraft, the world’s second-largest foodmaker behind Nestle, maintained that its offer “is fair and attractive” and said it remains confident it is the most logical player.

Ferrero is a privately held company with US$9 billion in revenue last year. Hershey posted revenue of $5.13 billion in its most recent full year.

Teaming up with Ferrero could give Hershey the financial heft to get into the bidding. Hershey is believed to need a larger, well-financed partner because of its smaller size and a complicated ownership structure.

Hershey’s late founder, Milton S. Hershey, established a charitable trust that remains the company’s majority owner. The trust’s chairman, LeRoy S. Zimmerman, has said the company is committed to aggressively pursuing growth strategies, but he has said the trust will not give up its controlling stake.

Analysts say that limits the company’s flexibility to grow through a merger if issuing stock to pay for an acquisition would dilute that stake.

The trust’s position goes back to 2002, when the previous trust board sought to sell the company. That prompted a ferocious community backlash and a lawsuit by the state attorney general, who led a purge of trust board members who voted for a sale.

Hershey has another interest in Cadbury. It has a longstanding license to sell some Cadbury products, including Cadbury and Caramello chocolate brands in the U.S. and York peppermint patties and Almond Joy worldwide.

Cadbury has a much stronger sales position in fast-developing countries, such as India, where sales are climbing more quickly, while about 85 to 90 per cent of Hershey’s sales are in the relatively slow-growth market of North America.


AP Business Writers Sarah Skidmore in Portland, Ore., Michael Lee in New York and Robert Barr in London contributed to this report.

Just Posted

City Hall Park construction begins next week

Construction to update Red Deer’s City Hall Park is set to begin… Continue reading

PHOTOS: Jazz at the Lake begins

The 16 annual event began Friday and runs until Sunday in Sylvan Lake

Photos: Lunchtime tunes on Alexander Way

Final concert of the summer

Clearwater regional firefighters in B.C.

Crew operating west of Prince George

PHOTOS: Samson Cree Nation Pow Wow

The Samson Cree Nation hosted its annual Pow Wow, celebrating youth last weekend

WATCH: Feasting at Red Deer Ribfest this weekend

Ribfest runs until Sunday at Rotary Recreation Park

Canadians believe in immigration but concerned about asylum seekers: study

OTTAWA — Canadians are generally supportive of current immigration levels, a survey… Continue reading

Quebec announces plan to compensate taxi drivers after Uber’s arrival

MONTREAL — The Quebec government has outlined how it intends to compensate… Continue reading

Hospitals to see ‘delays’ in care after losing Saudi students, health group says

OTTAWA — The loss of Saudi Arabian resident physicians in Canada’s hospitals… Continue reading

PHOTOS: B.C. city wakes up to darkness under wildfire smoke

The rest of the province also dealing with thick haze as smoky skies continue

Death Valley worker has seen highest, lowest temperatures

LAS VEGAS — Thousands of tourists descend on Death Valley each summer… Continue reading

Banff’s Sunshine ski resort upset with proposed guidelines from Parks Canada

BANFF, Alta. — An internationally known ski resort in Banff National Park… Continue reading

Folk singer Ian Tyson cancels show due to ‘serious medical situation’

TORONTO — Canadian folk singer-songwriter Ian Tyson has cancelled his appearance at… Continue reading

Judge lifts publication ban, revealing details about Fredericton shooting

FREDERICTON — Newly released documents reveal how last week’s deadly attack unfolded… Continue reading

Most Read

Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month