Cadbury, the confectioner that rejected Kraft Foods Inc's bid on Monday, may attract suitors ranging from Nestle SA to Hershey Co and sell for as much as $21bn (e14bn), according to analysts.
The UK-based maker of Dairy Milk chocolate and Trident chewing gum spurned Kraft's $16.7bn bid, saying it "fundamentally undervalues" the company, and its shares surged past the offer price, suggesting investors are expecting a sweetened proposal from Kraft -- or a rival offer.
Nestle, the only food company larger than Kraft, may be tempted to thwart its smaller rival's ambitions to bulk up and team with Hershey to break up Cadbury, according to Evolution Securities, Panmure Gordon and Kepler Capital Markets. Other potential predators include Kellogg Inc and PepsiCo Inc Kraft said it would keep trying to persuade Cadbury to start talks.
"We're moving towards the end game of consolidation in confectionery," said Simon Marshall-Lockyer, an analyst at Jefferies International in London. "The stakes are very high."
Cadbury declined to comment on whether it had received interest from any other companies.
The biggest transaction in the sweets business occurred last year, when Mars Inc, the privately held maker of M&Ms, bought Wm Wrigley Jr Co to surpass Cadbury as the world's largest confectioner. Cadbury and Kraft's combined sales in 2008 were $51bn, about half Nestle's revenue over the same period. Combined, Cadbury and Kraft would match Mars's 15pc share of the global sweets market, according to figures from Euromonitor, a London-based research firm. Nestle trails with a 7.6pc share of the market.
"This deal, if it were to go ahead, is bad news for Nestle," said Andy Smith, an analyst at Icap Plc in London. "They've got the firepower to counter if they want."
Kraft's announcement that it had approached Cadbury came at 7am in London on Monday, when US markets were closed for Labour Day.
Kraft fell as much as 7pc in New York Stock Exchange composite trading yesterday and slid $1.34, or 4.8pc, to $26.7. Cadbury, which soared 38pc in London on Monday, rose as much as 2.8pc yesterday before paring those gains as US markets opened.
The shares rose 6.5p, or 0.8pc, to 789.5p. At least five brokerages increased their price estimates to reflect the prospect of a higher bid. Jefferies International and Evolution Securities both lifted their targets to 900p a share.
Nestle chief executive officer Paul Bulcke said the firm had ruled out major acquisitions in 2009 and 2010, though he declined to comment on Cadbury specifically. (Bloomberg)