Cadbury Gets More Hostile

Roger Carr, the chairman of British candymaker Cadbury (CBRY:LN), is fighting a hostile takeover bid from Kraft (KFT). Since late August, when Kraft Chief Executive Irene Rosenfeld first laid out her $17 billion offer, Carr has called the bid derisory and unappealing and told shareholders in a public "defense document" not to let Kraft steal the company. On Jan. 13, as Rosenfeld landed in London to try to win over Cadbury shareholders, Carr spoke with Bloomberg BusinessWeek Associate Editor Susan Berfield by phone. Here are excerpts from the conversation:

What was your first impression of Rosenfeld?

I met her for the first time that day in August. She was brisk, efficient, delivered her proposal, and left quite quickly.

Have you talked to her since then?

Since then we've had no communication at all except what's been made public. [Both Kraft and Cadbury have posted an early exchange of letters on their Web sites.]

Will you see her in London now?

She flew overnight to see some of our investors today, including Legal & General Investment Management. Some others have said they don't want to see her because they regard the offer as not worth talking about. But I am pleased that she will hear from our investors firsthand about their views about her derisory offers.

What would it take for Rosenfeld to persuade Cadbury shareholders to accept her offer?

Our investors have made clear publicly that they regard the offer as totally inappropriate. The board has been given excellent support from shareholders. She would have to make a step change in her offer to make it palatable for shareholders. Providing they are effectively offered tomorrow's price today for the business, they would give serious consideration to an offer. But what they have been offered is not worth the price yesterday or today, never mind the future. The argument is about value, I have not strayed from that position, I have been on the record repeatedly saying it is the offer not the bidder that will determine the outcome.

But you have been very critical of Kraft as a bidder.

We have, however, made the point that the offer we have received is by any standard a derisory offer for this company. Look at any comparable transaction, and you will see it is a very low multiple they are offering. And you need to recognize that half their offer is in the currency of their shares, which has traded below its flotation price for nearly nine years. That is partially allied to the consistency of the company in missing its declared sales and profits targets. If you are a Cadbury shareholder and are being asked to exchange shares in a first-class company with a good record and excellent prospects for shares in a low-growth conglomerate with a poor record, you would have to think very carefully before accepting. The price is completely unacceptable.

Kraft said your defense document, published Jan. 11, was underwhelming. What's your response?

Our shareholders didn't find the document underwhelming. I think they found it very informing. We could demonstrate to the market what a very successful company Cadbury is, in stark contrast to the performance of Kraft. I think it was reassuring rather than underwhelming. I think the clarity with which we reviewed Kraft's own record must have been disturbing for them and illuminating for our shareholders.

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