Cadbury makes a last ditch effort to thwart Kraft hostile bid

Releasing its second response document yesterday in reply to the American food giant Kraft's $16.7-billion hostile takeover bid, confectioner Cadbury has asked its shareholders not to opt for becoming a part of an underperforming and unfocused company like Kraft, which has a track record of missed financial targets.

Warding off the hostile acquisition bid from the world's second largest food and beverage company, Cadbury unveiled robust financial figures for 2009 with 5 per cent business revenue growth, with operating profit margins of 13.5 per cent from under 12 per cent last year and projected a full year dividend of 10 per cent.

Many commentators feel the London-based confectioner's unveiling of its financial performance  was alast-ditch attempt by it to ward off Kraft.

Commenting on the 2009 performance, Todd Stitzer, Cadbury's CEO said, ''Our performance in 2009 was outstanding. We generated good revenue growth despite the weakest economic conditions in 80 years. At the same time, our Vision into Action plan drove a 160-basis point improvement in margin to 13.5 per cent, on an actual currency basis, delivering over 70 per cent of our original target in half the time.''

Cadbury gave further reasons why it believed Kraft's ''derisory'' offer was even more unattractive now than its sweetened December offer by saying that the offer price values Cadbury at only 12.0 times 2009 earnings before interest, tax, depreciation and amortisation (EBITDA), which is lower than any comparable transaction in the sector of 14.3 - 18.5 times EBITDA.

Slamming Kraft's performance, Cadbury said that the Illinois-based company's shares have significantly underperformed, and were down 42 per cent compared to its peers since its IPO in June 2001.
 
Roger Carr, chairman of Cadbury, said, "Kraft's offer is even more unattractive today than it was when Kraft made its formal offer in December. Kraft's offer is very significantly below all comparable transactions in the sector; applying any of the comparable multiples would imply a price per share far above Kraft's offer.''