Britain's Cadbury PLC kicked off a robust defense against Kraft Foods Inc.'s 9.8 billion pound ($16.3 billion) hostile takeover offer on Monday, urging shareholders not to let the U.S. maker of cheese, cookies and macaroni dinners "steal your company with its derisory offer."
Cadbury also confirmed that it had received rival approaches from The Hershey Co. and Italy's Ferrero International SA, but said they were too preliminary to begin proper talks and warned that it would not accept a sub-par offer from any suitor.
Kraft said Monday that its offer stands and that it was reviewing Cadbury's response. Kraft could still raise the bid under British regulations.
The prospect of 195-year-old Cadbury falling into foreign ownership has caused some consternation in Britain, where it is a much-loved brand, setting the tone of much of the takeover debate — despite protestations from Cadbury Chairman Roger Carr on Monday that there was no "Union Jack defense."
Felicity Loudon, a member of the Cadbury family, has lamented "the possibility of one of the last remaining British icons disappearing into an American plastic cheese company," while Britain's leading labor union fears more production jobs will be shipped offshore.
U.S.-born Cadbury CEO Todd Stitzer injected the already heavy political atmosphere with another twist on Monday by quoting from one of U.S. Founding Father Thomas Paine's collection of articles on the American Revolution: "What we obtain too cheap, we esteem too lightly; it is dearness only that gives everything its value."
Kraft, based in Northfield, Illinois, and others are attracted to Cadbury, the maker of Dairy Milk chocolate and Dentyne gum, for both its storied history and its current strong international reach and key presence in emerging markets.
Cadbury played on those strengths on Monday by raising its long term performance targets to play up its position as a strong independent company, including lifting organic revenue growth to 5-7 percent per year, up from a previously forecast 4-6 percent, and forecasting improved margins of 16-18 percent by 2013, up from the "mid-teens."
The company also held out a carrot to investors of double digit growth in dividends per share from 2010 onwards.
But some analysts have suggested those projections, at the top of the forecasts for the confectionary market, could be tough for Cadbury to achieve alone, and Carr did leave the door open for some kind of tie-up.
Cadbury 'not up for sale'
While stressing that Cadbury was "not up for sale," Carr acknowledged that Kraft's decision earlier this month to take cash and shares offer straight to shareholders after the British company's board rejected an almost identical approach meant it was now in takeover play.
That left the Cadbury board open to discussion with any potential suitor — Kraft included — that made a compelling offer, Carr said.
"As yet, we've only had one offer, which is far from compelling, it is ... derisory on a good day because it keeps falling, and we've had a statement of intent from two people that are yet to come forward with an offer," he told reporters.
"We have told them very clearly what the rules of the game are, but until they come forward ... with something that meets those criteria, then there is no point in getting into conversations," Carr said when asked if the board had held talks with Hershey and Ferrero.
Shares in Cadbury have shot up in recent weeks on the prospect of a bidding war following the unsolicited approach from Kraft, the maker of Oreo cookies, Nabisco crackers and its namesake cheese.
Kraft's proposed deal, which would create a global giant with an estimated $50 billion in combined revenue, includes 300 pence in cash and 0.2589 new Kraft shares for each Cadbury share. That is worth 727 pence a share, based on the close of trading on Dec. 11.
The stock was trading well above Kraft's bid price at 792 pence per share on Monday, up 0.25 percent, underscoring Carr's plea to shareholders not to "let Kraft steal your company with its derisory offer."
Offer may need to rise
While Kraft CEO Irene Rosenfeld has argued the U.S. company's offer is a substantial premium to Cadbury's "unaffected" share price, analysts suggest it would need to raise its offer to around 850 pence to even begin talks.
"I think there's an entry ticket price that one needs to pay ... we are a long, long, long way off that with the current position," Carr told analysts on Monday.
Charles Stanley analyst Jeremy Batstone-Carr said that Ferrero or Hershey could agree to a trading partnership, or so-called "white knight" relationship to rebuff Kraft and maintain the status quo in the global confectionary industry.
"Either that, or alternatively the possibility of stake building in Cadbury aimed at effectively blocking Kraft from establishing the necessary shares to gain control once the offer period runs out," Batstone-Carr added.
Kraft has said it wants to get the majority shareholder votes by Jan. 5, but it can take until February to complete the process.
Cadbury, meanwhile, will continue to dig in its defenses, with Carr proclaiming: "Kraft needs Cadbury, Cadbury doesn't need Kraft."
And Stitzer may well be thinking of another Thomas Paine quote about victory against all odds: "'Tis the business of little minds to shrink; but he whose heart is firm, and whose conscience approves his conduct, will pursue his principles unto death."