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Strategies & Market Trends : Speculating in Takeover Targets -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (2232)	9/9/2009 1:44:05 PM
From: richardred	Read Replies (1) \| Respond to of 7242

Cadbury Could Buy Hershey. Or Vice Versa. Javier Espinoza, 09.09.09, 12:43 PM ET LONDON - Cadbury, the British Trident Chewing Gum maker, could try to bid for Hershey as it tries to avoid being bought by U.S. giant food maker Kraft, analysts said on Wednesday. Cadbury was quick to reject a hostile takeover from U.S. food maker Kraft on Monday, but the market is already expecting a raised bid. There is very little Cadbury can do to avoid becoming a target as speculation grew that Nestle or Mars could enter a potential bidding war. There is one thing Cadbury could still do though. It could attempt to buy smaller U.S. rival Hershey - a business it has expressed interest in the past - and become too big for Kraft to swallow. Hershey's shares rose quite rapidly from 1.5% to 5% amid speculation of a possible Cadbury takeover bid. Reports have previously indicated that Cadbury has held talks with Hershey about a potential merger but the charitable Hershey Trust, which controls 78% of Hershey's votes, has firmly refused to let go of its control. But analysts believe Cadbury might be more motivated than ever to try to buy a business to avoid becoming part of Kraft and it could negotiate an agreement with the Hershey Trust to leave it with some control. A deal between the two chocolate makers make sense strategically as the British company lacks presence in the U.S., while Hershey lacks the global scope of Cadbury's business, experts have said. The acquisition is technically possible too, as Cadbury has a market cap of $17.7 billion compared to Hershey's $9 billion market cap. "Cadbury could buy Hershey by raising more debt but it would be an enormous share deal," said Jeremy Fialko, an analyst with Rebburn Partners in London. But he was also skeptical about the possible transaction. "The Hershey trust has been incredibly adamant about giving control that it would cut British shareholders out," he said. Still, Hershey is taking this seriously: analyst Andrew Wilkerson of Interactive Brokers reports that Hershey has hired JPMorgan Chase "to assist in outlining a potential counterbid for Cadbury." In a note Wednesday Wilkerson, in reference to the rise in Hershey's share price asked: "Whatever happened to merger/arbitrage theory that says shares of the buyer go down while those of the acquired go up?" If the theory is still valid, maybe that makes Hershey the target. The bankers at JPMorgan could just as easily advise Hershey on being acquired, after all. Yet Fialko said the only other option Cadbury has to remain independent is if shareholders decide not to sell the shares at what is seen a low valuation from Kraft but recognized that's not a popular option in the market. Industry experts are already expecting Cadbury to be taken over by Kraft after it launches a widely anticipated higher bid or for Hershey to team up with Nestle to try to acquire Cadbury's chocolate and gum businesses separately. Both companies have refused to comment about the prospects of a possible counterbid for Cadbury's business. Kraft's Chief Executive Irene Rosenfeld, who is number six in Forbes list of the World's 100 Most Powerful Women, declined to comment on the prospect of a fully-fledged hostile bid, or even the possibility of increasing its proposed offer. But she told Forbes earlier in the year that Kraft would be an "agressive" buyer. forbes.com