Ferrero may sweeten a Hershey bid for Cadbury

HARRISBURG, Pa. --- Hershey, hoping to expand its overseas presence, has lined up a potential partner as the most recognizable name in American chocolate considers starting a bidding war for British candy maker Cadbury PLC.

Italian candymaker Ferrero International SA could give The Hershey Co. the financial firepower to top a $16.4 billion hostile bid by Kraft Foods Inc. Hershey and Ferrero said Wednesday they are considering a possible offer for Cadbury.

"Hershey confirms that it is reviewing its options and at this stage there can be no assurance that any proposal or offer from Hershey will be forthcoming," the company said in an announcement to the London Stock Exchange on Wednesday. Ferrero, which makes Nutella chocolate spread and Tic Tacs, posted a similar statement.

Some analysts consider the pair a dark horse.

"The fact that they (Kraft) are alone and have the cash, that's why I think their bargaining power is greater, the ability to upbid is greater and their ability to pay for it is much greater than Hershey," Frost & Sullivan analyst Christopher Shanahan said Wednesday.

BMO Capital Markets analyst Kenneth Zaslow said Cadbury, with its strong international portfolio, would be more important to Hershey's long-term success than to that of Kraft.

"Hershey's long-term growth rate is limited by the inability of its product to travel far beyond the U.S. borders," Mr. Zaslow wrote in a note to investors.

Cadbury said it will consider any serious offer that delivers full value for the company. That would mean more than Kraft's bid, announced Nov. 9, which it dismissed as "derisory." Analysts say the price for Cadbury is likely to go higher if there is competition.

Kraft said its next step is to send an offer document to Cadbury shareholders by Dec. 7. Kraft, the world's second-largest foodmaker behind Nestle, maintained that its offer "is fair and attractive" and said it remains confident it is the most logical player.

Ferrero is a privately held company with $9 billion in revenue last year. Hershey posted revenue of $5.13 billion in its most recent full year.