Cadbury raises targets to fend off Kraft

Cadbury has launched a forceful defence against the US food giant Kraft's £9.8 billion ($22 billion) hostile bid for the Dairy Milk maker, and unveiled ambitious upgraded growth targets on margins for the next four years.

Alongside a pre-close trading update yesterday, the British confectionery specialist also revealed it had spoken to rivals Hershey and Ferrero about a potential alternative tie-up, but said neither had come up with a "fully financed, value proposition".

Cadbury chairman Roger Carr lambasted the hostile bid by the "low-growth conglomerate" of Kraft as "contemptuous of both our inherent value and our shareholders".

Kraft went direct to shareholders with an unchanged offer of 0.2589 of its own shares and 300p in cash for each of Cadbury's last month. The offer valued Cadbury at 728p a share in early trading in the US yesterday, while Cadbury shares closed at 795p.

Because of the fall in Kraft's shares and currency movements it is below the 745p a share indicative offer of £10.2 billion made by Kraft in early September.

Carr said: "It offers nothing that is commercially appealing or appropriately rewarding - it is a blatant and opportunistic attempt to acquire the right business at the wrong price."

City analysts believe Cadbury would consider engaging with Kraft if it came up with a bid higher than 800p, although some believe it may take a price of up to 950p.

Todd Stitzer, the chief executive of Cadbury, said: "It is the concept of taking what is a fast-growing sports car and sticking it into a four-door sedan in the slow lane of traffic."

Cadbury said its upgraded profit forecasts were not a "knee-jerk" reaction to the Kraft bid.

Cadbury revised upwards its revenue growth targets to between 5 per cent and 7 per cent a year, up from guidance of 5 per cent this year.

It upgraded its operating margins to be between 16 per cent and 18 per cent by 2013, up from at least 13.3 per cent this year.

The confectionery firm said its fourth-quarter trading had been "good" and in line with previous guidance.

However, Stitzer said that trading conditions in Europe remained challenging, and that the growth rate in the UK had "eased" as it comes up against a strong fourth quarter last year, which coincided with the relaunch of the Wispa chocolate bar.

But Cadbury cited an excellent performance in its key emerging markets, particularly South America and India, as well as good sales in its US gum business and at Halls.

Investec forecasts a jump of more than a third in pre-tax profits to £723 million in 2009.

Asked if the board had held talks with Hershey and Ferrero, Carr said: "We have told them very clearly what the rules of the game are, but until they come forward ... with something that meets those criteria, then there is no point in getting into conversations."

- INDEPENDENT