A war of words has erupted between Cadbury and its US suitor Kraft after the British confectioner branded its rival a “low-growth conglomerate” and dismissed its proposed £9.6bn takeover as “unappealing”.
The attack came in a letter from Roger Carr, Cadbury’s chairman, to Irene Rosenfeld, the chief executive and chairman of Kraft, which outlined the British company’s arguments for remaining independent.
The hard-hitting letter, seen by The Sunday Telegraph, will raise tensions between the two camps after Kraft’s bid for its UK rival was publicly rejected on Monday last week.
It is rare for large public companies to become embroiled in critical public exchanges and Mr Carr’s arguments will be seen as a direct criticism of Ms Rosenfeld’s running of Kraft.
While Kraft will be eager to keep its approach on friendly terms, Cadbury’s criticism could see it give up on efforts to agree to a friendly takeover and move forward with a hostile bid.
However, it is thought likely that it will first table a second, higher offer on friendly terms.
Mr Carr also played to concerns among Cadbury shareholders over Kraft’s decision to fund its bid with a mixture of its own shares and cash.
“Your proposal is for Cadbury shareholders to exchange shares in a pure-play confectionery business for cash and shares in Kraft, a company with a considerably less focused business mix and historically lower growth,” Mr Carr said.
While Kraft’s offer led to speculation that Nestlé, the Swiss consumer goods giant, or Hershey’s, the US chocolate maker, could make a rival bid for Cadbury, the two have so far remained silent.
Reports were circulating last night that Hershey’s had held discussions with a US private equity firm to consider a rival offer but the reports remain speculative.
Under chief executive Todd Stitzer, Cadbury has focused on slimming down operations, most recently spinning off its US beverages business in May last year.
Referring to the strategy, Mr Carr said being “absorbed into Kraft’s low-growth, conglomerate business model” was “an unappealing prospect which contrasts sharply with our strategy to be a pure-play confectionery company.”
Mr Carr also pointed to the 7.1pc decline in Kraft’s share price since news of the offer became public. The value of Kraft’s bid has fallen from £10.2bn to £9.6bn.
Meanwhile, Cadbury’s market value rose 37pc over the week to £11.4bn following Kraft’s approach, initially valued at 745p a share.
“The proposal is of uncertain value for Cadbury shareholders as underlined by the movement in the Kraft share price since your announcement,” Mr Carr wrote.
Cadbury’s chairman also responded to Ms Rosenfeld’s suggestions that Cadbury lacked the size to compete on a global scale.
The company has “a clear set of targets” and “a track record of delivery accepted by the market,” Mr Carr said.
“We have the scale, capabilities and resource to deliver on our commitments to shareholders.”
Analysts have backed the industrial logic of Kraft’s bid, but believe a bid of more than 850p will be needed to secure talks with Cadbury.
Kraft declined to comment last night.
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