Kraft remains in pole position for Cadbury despite Hershey/Ferrero rumors
Analysts are mostly skeptical about the likelihood of Hershey (HSY) and Ferrero mounting a successful joint bid for Cadbury (CBRY) to thwart Kraft’s (KFT) pending bid for the company. However, the threat of a rival bid may be enough to coax a slightly sweeter offer from Kraft.
Both Bloomberg and Reuters offer good summaries of analyst opinion and FT Alphaville weighs in with a JP Morgan analysis arguing that it is difficult to see how the financing would work for Hershey without it either almost doubling its existing equity (and convincing shareholders to buy it), or losing its investment grade credit rating.
The big question mark is how much equity can HSY raise from existing shareholders through a rights issue (we doubt Ferrero or Cadbury shareholders would take HSY non voting shares) without the Trust subscribing to the rights and HSY still keeping its dual class share structure. – JP Morgan
The FT’s Lex notes that, “to the distress of Cadbury shareholders hoping for a more full-fat alternative to Kraft’s cheeseparing bid, the likelihood of a Ferrero or Hershey offer – separately or jointly – remains slim.”
In Lex’s view Hershey would be better of partnering with Nestle (NESN).
However, Nestle may be more interested in Mead Johnson Nutrition (MJN) following its spinoff from Bristol-Myers Squibb (BMY). The maker of Enfamil baby formula would appeal to Nestle because of its strength in Latin America and Asia, says Claudia Lenz, an analyst at Bank Vontobel AG.
Previous ResearchRecap posts on this topic are here.
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