Kraft Foods Inc
Kraft said on Tuesday it would remain disciplined in pursuing Cadbury, and said shareholders should question the new goals and higher dividends promised by the British company.
Cadbury again rejected the offer from the maker of Oreo cookies and Velveeta, in a statement issued on Monday.
We have heard nothing from Cadbury that surprises us, Kraft CEO Irene Rosenfeld said on Tuesday. Cadbury's defense document only reinforces our belief that there is a compelling strategic and financial rationale to combining these two companies.
Cadbury Chairman Roger Carr said Hershey
Kraft's cash-and-stock offer is worth just under 730 pence ($11.85) per share. Cadbury shares trade at 791 pence ($12.84), about 8.4 percent higher than the Kraft bid. Kraft shares fell 12 cents to $26.85 in midday trade on Tuesday.
The emergence of credible counter bidders for Cadbury could mean that Kraft has to materially increase its bid to be successful, Evolution Securities analyst Warren Ackerman said.
We think an 850 pence bid with a 400 pence cash element could satisfy the criteria Kraft has laid out for remaining a disciplined buyer, he added.
But Hershey has yet to show it is willing to take on the debt required to purchase Cadbury, more than twice its size. Without a rival bid, a key Cadbury investor questioned whether Kraft would move that much higher.
The only way this situation can change dramatically is if Hershey comes out and bids. But we think that's unlikely to happen, one top 10 Cadbury investor told Reuters.
Otherwise, Kraft might raise (its original offer), but not as much as Cadbury shareholders want, the investor said. Investors want anything over 800 pence, but it seems unlikely that Kraft's going to do that.
RALLY IN BOURNVILLE
Aside from shareholders looking for more money, Kraft is also facing Cadbury workers who are worried about losing their jobs, and British officials who are worried about losing an iconic British company.
Cadbury is under threat because it is a highly successful company, and I will do everything I can to keep Cadbury independent, local Member of Parliament Stephen McCabe said at a meeting of some 200 Cadbury workers in Bournville, England.
Union officials and local members of parliament will take their case to Business Secretary Peter Mandelson on Wednesday to argue that state-funded Royal Bank of Scotland should not be among banks financing Kraft's bid for Cadbury.
Kraft urged shareholders to question whether Cadbury can hit its new revenue growth targets, if it can deliver its margin targets without further spending on restructuring, whether its margin goals are achievable, and what its underlying cash flow is.
Cadbury responded by saying Kraft seemed to have run out of ideas.
No smoke or mirrors will change the fact that Kraft's offer remains derisory, a spokesman for Cadbury said.
Kevin Dreyer, a research analyst and associate portfolio manager at Gamco Asset Management, which holds just less than 1 percent in Cadbury, said, Kraft is playing poker - they are waiting to see if there's another bid to force their hand.
Panmure Gordon analyst Graham Jones said Cadbury should meet its revenue growth targets probably in much the same way as it has done consistently for the five years. He dismissed claims Cadbury would have to spend more on restructuring.
Kraft said its trading and prospects are strong but noted that its share price performance had been adversely affected since it first bid for Cadbury on September 7.
(Additional reporting by Raji Menon and David Jones; Editing by Victoria Bryan, Hans Peters and John Wallace)