Kraft-Cadbury Battle Nears Endgame as Cadbury Announces Strong Results

There’s little sign of Kraft (KFT) getting any closer to acquiring Cadbury(CBY) as the bid deadline approaches.

Cadbury Tuesday continued its vigorous rebuffing of Kraft, announcing a strong forecast for 201o and pouring scorn on Kraf’ and its “derisory” and “inadequate” offer.

Roger Carr, chairman of Cadbury, said the Kraft shares in the bid also exposed Cadbury “shareholders to Kraft’s low-growth conglomerate business model, its long history of underperformance and its track record of missed targets.”

Kraft will publish the final details of its offer on Jan. 19, and Cadbury shareholders have until Feb. 2 to decide whether or not they will accept it.

Martin Deboo at Investec Securities believes “Kraft will need to come up with an offer north of 8 pounds and with a significantly enhanced cash component to take over Cadbury.”

“We suspect that an increased offer in the range of 825-850p could well be sufficient to clinch the deal,” said analyst Graham Jones at Panmure Gordon.

Bloomberg reported that the strong report “doesn’t add anything new to the debate in our view,” Nomura International analyst Alex Smith wrote today. “We still see a majority probability of a successful Kraft takeover at a higher price of around 840 pence.”

Cadbury shares closed off 0.5 percent at 775.6p on Tuesday. Kraft’s shares rose 19 cents to $28.99, meaning that Cadbury shares were trading at a 1.5 percent premium to the current value of Kraft’s offer, according toDealbook.

Now that it seems unlikely that a rival bid will emerge, Kraft only needs to calculate the minimum it can pay to win Cadbury, without alienating shareholder Warren Buffett who has warned Kraft against overpaying. Italy’s Ferrero has decided not to bid for Cadbury. A source close to the situation told Reutersthat Ferrero would not proceed with a bid. A second source close to Ferrero said the company had ceased talking with Hershey , a potential partner in a rival bid.

Execution analyst Martin Dolan believes that Cadbury will end up being acquired by Kraft, but that the the current offer is inadequate.

Without a higher bid, Cadbury may still stay independent.

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