Blog: Dean BestThe bitter battle for Cadbury

Dean Best | 28 September 2009

The battle for chocolate maker Cadbury is getting more bitter by the day.

On Thursday, while Todd Stitzer, Cadbury's CEO, was criticising "unbridled capitalism" in an apparent defence of the UK group's Quaker origins and a veiled criticism of Kraft Foods, Irene Rosenfeld, the boss of the US food giant, was trying to convince employees in Illinois that buying the UK confectioner was not vital to the business.

Over the weekend, Rosenfeld criticised Stitzer and accused her Cadbury counterpart of failing to "do the math quite accurately" when he rejected her initial, proposed offer and talked up the prospects for the Dairy Milk and Hall's maker as an independent company.

Nevertheless, despite Rosenfeld telling her employees that Kraft would remain financially disciplined in its pursuit of Cadbury, speculation has mounted over the weekend that the company is set to table a hostile GBP11bn (US$17.49bn) takeover bid.

All this came after Stitzer got himself - and the Trident gum maker - into something of a sticky situation last week with the confusion over comments he did or didn't make to analysts in London. One analyst at the meeting claimed that Stitzer had admitted a sale to Kraft "made some strategic sense", that he did not expect the Milka and Cote d'Or chocolate maker to "walk away" and that the Cadbury boss saw his job as getting "as much value as possible".

Apart from attracting the scrutiny of the UK's Takeover Panel, Stitzer's alleged comments prompted days of rumours in the press that Cadbury's stance on Kraft was softening. On Friday afternoon, however, Cadbury, sought to "clarify" that "press commentary", insisting that Stitzer's comments had been "misconstrued". Given Cadbury's shares closed up at 800.5p on Friday - and were up again this morning - the market seems to be waiting for a second, higher offer from Illinois.

Shares in Sara Lee, the US food and beverage group behind brands like Ball Park franks and Douwe Egberts coffee, closed up on Friday after the company secured a deal to sell its personal care business, including Sanex and Brylcreem to Unilever.

The US$1.28bn sale has thrown up some interesting questions for Sara Lee's food business. Sara Lee should now have greater resources to invest in food and drinks and its North American retail operations - including Jimmy Dean and Hillshire Farm meats - and its international tea and coffee division look set for a windfall.

However, there are indications that the group's international bakery operations could be next on the block. Sara Lee has seen underlying profits from its international bakery division tumble 14% in the last three years - the worst performance of any of its units. Sales growth from the division is the lowest throughout the Sara Lee empire. Moreover, Sara Lee boss Brenda Barnes has marked international bakery as "low priority" for capex and M&A investment. Sara Lee has admitted it is looking to exit "non-core" businesses and nothing screams "non-core" as much as tumbling profits, stagnant sales and being low priority for capex and M&A.

Global bakery, it seems, could soon no longer be Sara Lee's bread and butter.


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