Hershey And Ferrero Complicate Kraft's Cadbury Bid

Kraft’s attempt to buy Cadbury has gone from Cadbury trying to tease more money from Kraft, to Cadbury rejecting Kraft’s firm offer, to Kraft going into hostile-takeover mode, setting the stage for a long boardroom battle for chocolate control.

Does that sound as complicated as nougat yet? Now, enter Hershey. North America’s largest chocolate manufacturer (and the brand responsible for 10% of my diet) has been eyeing Cadbury for weeks and might partner with Ferrero, the Italian chocolate-maker responsible for Nutella, to make a run at the coveted confectioner.

Both Hershey and Ferrero have been mum, but the reports are likely to force Kraft to raise its offer, which could lead to a “Barbarians at the Gate” slugfest reminiscent of the leveraged buyout of RJR Nabisco 20 years ago.

The Guardian notes that Hershey already has a relationship with Cadbury – a license to create Cadbury chocolate, including Dairy Milk bars and those addictive Crème Eggs, in the US – and Ferrero is looking to bolster its presence in Europe -- mainly Italy, France, and Germany -- with Cadbury’s British stronghold.

But while Cadbury is not keen on Kraft, Hershey and Ferrero might not be its savior either. The Guardian cautions:

A joint bid would inevitably involve carving up Cadbury's assets, creating more uncertainty for the company's employees. Hershey is likely to be keen to get its hands on Cadbury's gum operations – particularly Trident, which is attempting to take on the dominance of Wrigley in the US.

Cadbury employees might not be thrilled with the prospect of a new owner, but stockholders are probably licking their lips. In the case of RJR Nabisco, the company was going to be taken private at $75 a share, but warring investors drove the price up to $112 before a final settlement of $109 was reached.

And if an even larger food conglomerate like Nestle or Unilever jumps in, as has been rumored, expect things to get even sweeter.