5 July 2007 - A report in the 'Financial Times' this morning cites sources close to Kraft Foods who claim that the recent acquisition of Danone's biscuit business (LU) means that the firm is therefore likely to drop its interest in Cadbury's confectionery division.
One source told the paper that, in addition to Danone’s biscuits, Kraft could still eventually afford to buy Cadbury's confectionery business as the company has a market cap of USD 55 billion.
However, the possible deal would not be expected in the near future as Kraft would need to focus on the integration of the Danone biscuits business and on its divestitures.
Another source claims that the LU acquisition is also likely to speed up the company's divestiture plans, the source close to the company added.
Although Kraft’s purchase of Cadbury's candy and gum business cannot be ruled out, it probably will not happen after the 5.3 billion euro LU deal, said a consumer banker.
Cadbury’s Sweets – A Prime Target
Last month, Cadbury Schweppes unveiled its new confectionery strategy, which will see the separation of its beverage and confectionery operations. The company is envisaging a sale of the beverage business, which would leave the company with just a confectionery business.
In March, FLEXNEWS reported that an eventual sale of the drinks unit would leave Cadbury’s remaining operations (the confectionery business) vulnerable to a takeover. Kraft, along with Hershey and private equity funds, were cited as the most likely bidders.
What about Nelson Peltz?
The US activist investor has stakes in both Cadbury and Kraft Foods. FLEXNEWS recently reported that Peltz, upped his stake in Cadbury Schweppes to 3.47%. Peltz also recently bought a 3% stake in Kraft Foods.
Furthermore, Peltz has a history of building stakes in companies with a view to forcing change, and it was earlier reported that splitting the Cadbury beverage business from the confectionary business was one of his objectives.
The investor is reportedly planning to pressure Kraft's management into selling off the Post cereals and Maxwell House coffee businesses use the cash raised to buy back shares and expand overseas. Could Cadbury’s confectionery business be part of this plan?