Banks back Hershey bid for Cadbury

US banks back Hershey in its bid for Cadbury

US banks back Hershey in its bid for Cadbury

November 29 2009 12:32 PM

US chocolate giant Hershey has lined up more than £4 billion in financing to launch a rival bid for Dairy Milk maker Cadbury, it has been reported.

Cadbury is already facing a hostile £9.8 billion bid from Oreos to Dairylea maker Kraft, although Hershey said two weeks ago it was considering its options.

The company has now lined up loans from JP Morgan and Bank of America to fund a £10.3 billion offer for Cadbury and spark a full-blown bid battle, the Observer newspaper reports.

Hershey, a US brand known for its Hershey bars and Kisses, is smaller than Cadbury and could sell off some of its European brands to Italian confectionery firm Ferrero or launch a possible joint bid, the report adds.

The US firm, which was unavailable for comment, is considering the move to prevent being swallowed up by industry consolidation itself in years to come. Several US pension funds are also said to be ready to back a formal offer.

Hershey, which is controlled by a charitable trust in Pennsylvania, already has a business relationship with Cadbury, holding a licence to make Dairy Milk bars and Cadbury Creme Eggs in the US.

Cadbury was thrust into the bid spotlight in September when it said it had rejected a cash-and-shares merger with Kraft valuing the business at £10.2 billion.

Kraft turned hostile in its attempts earlier this month although it failed to improve the terms of its original approach, which was actually worth less than in September due to declines in Kraft's share price.

Cadbury has described the Kraft proposal as "derisory" and is set on remaining independent unless the price is right.

The business began life as a grocer's shop in Birmingham's fashionable Bull Street in 1824. Dairy Milk is the UK's top-selling chocolate bar and more than 250 million are sold every year in 33 countries.