Since catching the attention of Kraft Foods as a takeover target last month, Cadbury, Britain’s long-standing confectioner, has made it clear that they are not interested in crossing the pond. Nevertheless, Kraft seems to have taken the rebuff as a particular challenge and decided to press on with talks and possibly make another offer to acquire the well known brand.
Many reasons have been cited for Kraft’s interest in adding to their candy cache. One point of interest proposed by Erin Swanson, a Morningstar Analyst, is the lack of private label competition in the confectionery category. “Strategically, we believe the acquisition of Cadbury makes sense for Kraft as the firm stands to gain a larger foothold in the attractive confectionery industry (which is higher growth and higher margin than other categories in the packaged-foods space). Private-label competition is minimal in the confectionery market (in contrast to Kraft’s other segments), and the deal would not only expand the firm’s international presence but provide it with an expanded platform to distribute some of its existing brands.”
Cadbury, however, is still holding out, maintaining that shareholders would like to see the company remain independent. In addition, The Wall Street Journal reports that Cadbury’s third quarter sales figures were robust, making an acquisition appeal even more costly for Kraft Foods.
Several important dates are coming in the Kraft-Cadbury saga. Kraft is expected to release their third quarter results on November 3rd during which they may reveal their cards in the deal. November 9th is the deadline for Kraft to make another approach to Cadbury (based on the English rules of takeover engagement). It will be interesting to watch this one unfold in the coming weeks.
