Cadbury, Hershey in talks for rival bid against Kraft: WSJ

Hershey asks direction from Cadbury, discloses financial terms and structure of a possible offer

Resisting a hostile takeover bid by US-based Kraft Foods, British Confectionery major Cadbury has held talks with American chocolate maker Hershey to encourage a rival offer, says a media report.

Attributing to people familiar with the matter, The Wall Street Journal said that Cadbury board members have discussed with Hershey directors a rival offer.

Also, the Cadbury board members have told the Hershey directors that they would support a bid by the Pennsylvania company and provided some guidance on the kind of price that would draw board support, the report noted.

The WSJ said Hershey has sought direction from Cadbury and disclosed the financial terms and the structure of a possible offer. Hershey has also enquired whether Cadbury would be open to selling certain assets.

In response, Cadbury has provided "reasonable guidance without specifics", the daily said, citing one of the people.

Cadbury board members and Chief Executive Todd Stitzer have said publicly and privately that they see Hershey as a better fit than Kraft. At the very least, a Hershey bid could push Kraft to raise its own offer.

The WSJ, however, quoted some other people also in the know who cautioned that the talks between Cadbury and Hershey are not very detailed and that Cadbury's primary interest is to remain independent.

According to UK takeover rules, should Cadbury open its books to Hershey as part of such discussions, it would have to do the same for Kraft.

The report said Kraft and Cadbury are not currently in discussions, and the possibility of the two firms beginning talks anytime soon about a friendly deal appear slim.

Though Cadbury officials have argued that Hershey and Cadbury would be a better operational and cultural fit, they stress that the final decision on any deal will come down to who offers the greatest value.

A bid for Cadbury would also test Hershey financially. With annual sales of about $5.2 billion and a market capitalisation of $8.5 billion, Hershey is about half the size of Cadbury, which has a market cap of $17 billion.

The WSJ said representatives of Hershey and the Hershey Trust declined to comment.