Chicago, Sep. 10 - Hershey Co could make a bid to take over British-based chocolate and chewing-gum maker Cadbury PLC without the Milton Hershey Trust having to give up its controlling stake in the U.S. company, J.P. Morgan said in a research note Thursday.
"While we continue to regard Hershey as an unlikely bidder for Cadbury, an offer from the Pennsylvania chocolate maker is not out of the question," analyst Terry Bivens wrote in a research note.
Cadbury is in play after Kraft Foods Inc disclosed on Monday that it had proposed an offer then valued at $16.7 billion for Cadbury -- an offer Cadbury's board rejected. The value of that offer has declined some this week, as Kraft's shares have fallen and the British pound has appreciated.
One potential outlet for Cadbury has been seen as a tie-up with Hershey. But the Hershey Trust, which holds a majority of the voting shares in Hershey, has said that it is required to keep control of the company.
A source familiar with the situation told Reuters on Tuesday that JPMorgan was advising Hershey on a possible strategy regarding Cadbury.
Hershey couldn't immediately be reached for comment on Thursday and has in the past declined comment on Cadbury.
In his note, Bivens said that Hershey could issue as many as 460 million shares of Class A stock without compromising the trust's majority position, which is based heavily on Class B super-voting shares.
"For example, an 800-pence bid from Hershey, or roughly 8 percent higher than Kraft's initial proposal, could consist of roughly $6 billion in cash and, at an assumed Hershey share price of $33, entail the issuance of some 362 million shares of Common A," Bivens wrote. "The resultant cash EPS dilution, however, would be a considerable 22 cents in 2010, but turn accretive in 2011, by our numbers."
Hershey shares were down 26 cents or 0.6 percent at $40.23 on the New York Stock Exchange. Kraft fell 60 cents or 2.2 percent to $26.25; the shares traded at $28.32 on Sept. 4, the trading day before its bid for Cadbury was disclosed. In London, Cadbury shares were down 0.5 percent at 782 pence.