Cadbury today (12 January) derided Kraft Foods’ “embarrassment” at the warning the US food giant received from leading investor Warren Buffett over offering too much stock to finance a takeover.
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The UK confectioner this morning stepped up its defence against Kraft, telling its own shareholders the company had enjoyed an “outstanding” year.
Cadbury chairman Roger Carr urged shareholders not to let Kraft “steal” the business and reiterated the board’s unanimous rejection of the US group’s GBP10.5bn (US$17bn) hostile offer.
Speaking on a conference call today, Carr dismissed suggestions that a gap was narrowing between Kraft’s offer and the UK firm’s share price adding that he thought it was Kraft’s options would be narrowed by the intervention of Buffett’s investment vehicle Berkshire Hathaway.
“[Hathaway] are clearly getting an iron grip on Kraft management,” Carr told analysts. “They’re doing that for their own self-interest. Clearly, any gain that Kraft enjoys from a bid is at the expense of Cadbury shareholders. From that perspective it’s interesting to watch their embarrassment, it doesn’t change our position at all.”
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By GlobalDataCarr once again insisted that the Kraft offer remains “a derisory price” and that it was still looking at a mix of cash and shares where the share value is “uncertain” and the cash value is “constrained”.
“I think on a comparative basis it’s a profit multiple that is materially lower than any comparable transaction we’ve seen in recent times and all of this is being offered by a management team that has a long track record for over promising and under delivering, which is in strong contrast to the Cadbury position,” Carr insisted.
Asked whether any price would be right to have Kraft running Cadbury, Carr said that the value of the UK confectioner, “by any stretch of the imagination”, had been “materially underplayed” by Kraft.
“Looking at who can extract the best performance of the business, the current Cadbury management team would have, without any doubt, a very real edge over the Kraft alternative,” Carr said.
While both Italian confectioner Ferrero and US chocolate giant Hershey have both been linked to a possible counter-bid for Cadbury, Carr said its position remained clear and that there is “an open door” for people that can make “sensible offers that reflect the appropriate value of the company in a funded and appropriate way”.
“The door is open to those people, they’ve registered their interest, there is a timetable ahead and we shall see if they come forward. If they do we will examine it and take any serious offers very seriously,” Carr said.
Cadbury this morning revealed that underlying revenues had grown 5% in 2009, with a 6% rise in the second half. The company’s trading profit margin rose to 13.5% from 12%. The firm also said it expects its full year dividend to grow 10% on last year.
In comparison, CEO Todd Stitzer told analysts that Kraft’s underlying profit had not grown “at all” between 2004 and 2008, and that over a four year period Kraft had been unable to increase its profits, yielding just 17% shareholder return since 2001, compared to Cadbury’s 30%.
“[Cadbury] is a first-class company. It’s worth a lot of money, considerably more than is being offered and we can make that comment on a comparative basis against any other transaction that is being done in recent times or when you factor in the kind of performance we’re seeing in 2009 in order to determine what multiple and where value lies as a result of that,” Carr added. “Our position hasn’t changed at all, their position clearly has and we will see in the days to come what the effect of that is.”
