The landscape for the takeover battle of the British maker of Dairy Milk chocolate, Cadbury widened yesterday with smaller rivals Hershey Co and Ferrero International SA saying that they are considering a possible offer for Cadbury.

Hershey, the Pennsylvania-based confectioner and Italian chocolatier Ferrero said in separate statements yesterday that they were reviewing a possible bid, but gave no assurance that they would make an offer for Cadbury.

Both companies were forced to respond after Britain's Panel on Takeovers and Mergers asked them to clarify media reports, which had said that they were considering a joint bid for Cadbury.

"Hershey confirms that it is reviewing its options and at this stage there can be no assurance that any proposal or offer from Hershey will be forthcoming," the company said in a statement, which was similar to the one put out by Ferrero.

After the UK-Based Cadbury Schweppes rejected a $16.7-billion unsolicited takeover offer from Kraft Foods in September saying that its rival's low-growth, conglomerate business model were unappealing, (See: Kraft's low growth business model unappealing: Cadbury),
analysts had widely speculated that Hershey would team up with a bigger player to make a counter offer for Cadbury. (See: Hershey's, Nestle may counterbid for Cadbury)

Hershey, founded in 1894 by Milton Hershey, and now run by the tight-knit Hershey Charitable Trust that controls 77 per cent of the company's voting stock and 31 per cent of common stock, is North America's leading manufacturer of chocolate and non-chocolate confectionary and chocolate-related grocery products. Some of its most well known chocolate brands include Hershey's Kiss, Kit Kat, and Reese's Peanut Butter Cups.

Ferrero, based in Pino Torinese near Turin is run by the Ferrero family. headed by Italy's richest man Michele Ferrero, and his two sons Pietro and Giovanni.

The Ferrero company, well known for Ferrero Rocher and Kinder chocolates, was named by Reputation Institute in a 2009 survey as the most reputable company in the world.

But its main market is Western Europe and has traditionally shied away from acquisitions for growth. It has not made a single acquisition from the time the company was founded in 1946.

Both companies were reportedly in talks for a joint bid and have spoken to investment bankers separately to raise funds for the acquisition but were waiting for Kraft to take its bid hostile, which the Northfield, Illinois-based Kraft did last week. (See: Kraft goes hostile with original offer)

Seeing that there was no other competing offers on the horizon, Kraft chose not to hike its September original offer of 300 pence in cash and 0.2589 new Kraft share per Cadbury share, which was once again rejected by the Cadbury board terming the hostile bid as "derisory."

Kraft responded to Hershey's and Ferrero's statement by saying yesterday that the company remains confident that is absolutely the best, most logical partner for Cadbury.

Hershey is a dominant player in the North American market, but out of the $5.13 revenue in 2008, a mere 14 per cent of that revenue comes from outside the US.

Hershey already has a tie-up with Cadbury since 1980 to market Cadbury's candy in the US market and a takeover of Cadbury's chocolate business would open the European and the vast emerging markets, where Cadbury's strength lies.

Cadbury had about 10.2 per cent of the global market share in the candy market in 2008, while Kraft had 4.7 per cent, Hershey 4.6 per cent and Ferrero 4.5 per cent. (See chart)

Both Hershey and Ferrero would have to make an offer, which many analysts believe to be 800 pence a share to make the shareholders of Cadbury interested in their bid. But analysts feel that both companies do not have financial muscle power to raise about $20 billion to take on Kraft.

Hershey had $1.5 billion in long-term debt and $119 million in cash as of 4 October 2009, while Ferrero does not disclose its debts since it is a private company, but the Wall Street Journal said yesterday that its net debt was about twice its earnings before earnings, interest, tax, depreciation and amortisation.

According to a source, Reuters had said that JP Morgan is advising Hershey and is likely to provide financing to support its client, while Rothschild is advising Ferrero.

A bid by Hershey and/or Ferrero for Cadbury will depend upon them turning up with the required financing since the British takeover rules require that any rival bidders secure financing before bidding.

Once Kraft posts its formal offer document to Cadbury shareholders, it has 46 days to mull raisingits offer price, and 14 days after that in which to secure acceptances from a majority of shareholders.

If a rival bid emerges, the 60-day timeframe for its bid starts over, which may go on till February next year.