Kraft questions Cadbury’s long-term targets

By Caroline Scott-Thomas

- Last updated on GMT

Kraft has dismissed the raised long-term growth targets published by Cadbury on Monday, saying the UK confectioner’s prospects are subject to significant risk and uncertainty.

The targets were published as part of Cadbury’s defense document, in which it urged shareholders: “Don’t let Kraft steal your company with its derisory offer.”

Kraft’s hostile bid, now worth about $16.1bn (₤9.9bn), was launched a month ago after Cadbury’s board rejected its initial offer in September. The US company effectively sidestepped the board appealing directly to shareholders by making an official second bid of the same nominal value, although its value has declined due to a slide in the Kraft’s share prices.

In its defense document, Cadbury played up its position as a strong independent company and raised its performance targets for the next four years, including raising organic revenue growth to five to seven percent per year, from its previously forecast four to six percent, and forecasting improved margins of 16-18 percent by 2013.

However, Kraft criticized Cadbury for choosing to focus on the long term, “with very little information on its prospects for 2010” ​and urged shareholders to question Cadbury about how it expects to meet this margin growth while cocoa prices remain high.

Kraft also said that together the two companies were “a uniquely complementary fit”​ that would be able to achieve cost savings that Cadbury could not achieve on its own.

Better together

In response to the document, chairman and CEO of Kraft Foods Irene Rosenfeld said: "We have heard nothing from Cadbury that surprises us. Cadbury's defense document only reinforces our belief that there is a compelling strategic and financial rationale to combining these two companies and that doing so would be in the best interest of both companies' shareholders.”

She also suggested that Kraft would not consider raising its bid unless other offers are brought to the table.

Rosenfeld said: “Kraft Foods will continue to maintain a disciplined approach with respect to the acquisition of Cadbury in line with the criteria outlined in our offer documentation."

Cadbury confirmed on Monday that it had been approached by other interested parties, although it did not name them.

Kraft has also announced that its potential acquisition has now cleared US antitrust hurdles.

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