Kraft vows to be disciplined in pursuit of Cadbury

Kraft, the giant American food company, said last night that it would “remain disciplined” in pursuing a bid for Cadbury, the British chocolate maker, even as it lowered its outlook for sales for the coming year.
The US group’s statement of intent came as reports suggested that Kraft had obtained $9 billion (£5.5 billion) of financing for its bid from nine banks. The lead underwriters are understood to be Citigroup, Deutsche Bank and Barclays. Kraft declined to comment.
Reporting third-quarter results after the bell, Irene Rosenfeld, the company’s chairman and chief executive, reiterated her interest in Cadbury. “We remain interested but will maintain a disciplined approach,” she said, as the company trimmed its sales forecast from 3 per cent to 2 per cent but unveiled profits significantly ahead of analysts’ expectations.
Kraft shares fell nearly 3 per cent to $26.75 in after-hours trading soon after the announcement of its third-quarter results, which have been eagerly anticipated by markets, as the company’s proposed offer for Cadbury, made in September, contains a share element. This is significantly below the $28.10 they were at before the Cadbury proposal was announced.

Ms Rosenfeld said Kraft continued speaking to shareholders of both companies and reviewing potential financing options for its £10.6 billion bid.
The American foodmaker, which already owns a number of British brands, including Terry’s Chocolate Orange, offered 745p a share for Cadbury in September in cash and shares. The bid was swiftly rebuffed by Cadbury, which described the proposal as an “unappealing prospect”.
“There has been a lot of speculation about what we can afford,” Ms Rosenfeld said last night during a conference call for analysts and investors. “What we can afford is not relevant. What is relevant is what Cadbury is worth.”
That alone, she added, would determine Kraft’s approach to the bid for Cadbury, which makes Creme Eggs and Dairy Milk and has a big American shareholder base.
“Our criteria include accretion to cash EPS [earnings per share] in the second year, delivering a return on investment well in excess of our cost of capital, and maintaining both our investment grade credit rating and our dividend.”
Kraft faces a November 9 deadline, set by the UK Takeover panel, to issue a formal bid for Cadbury or walk away from the deal for six months. It has been widely expected to unveil an off-er in time to meet the deadline, but last night’s fall in the share price could complicate the process.
Kraft, whose brands include Oreo cookies, Philadelphia cream cheese, Maxwell House and Jacobs coffee, posted third-quarter earnings of $826 million, or 55 cents a share. This compares with last year’s figures of $1.36 billion, or 91 cents a share, which included a 57 cents a share gain from the sale of Kraft’s Post cereals.
Revenue fell 5.7 per cent to $9.8 billion. Ms Rosenfeld said the company’s organic net revenues grew by half a per cent, held back by lower food prices, which were the result of lower dairy costs during the quarter.
Revenue was also hit by the company’s decision to discontinue some of its less profitable lines and to focus on premier brands instead.
The company raised its profit forecast by 4 cents to $1.97 a share, but this improvement depends in part on a lower expected tax bill, rather than on pure revenue growth.
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Kraft vows to be disciplined in its pursuit of Cadbury

Kraft, the giant American food company, said last night that it would “remain disciplined” in pursuing a bid for Cadbury, the British chocolate maker, even as it lowered its outlook for sales for the coming year.
The US group’s statement of intent came as reports suggested that Kraft had obtained $9 billion (£5.5 billion) of financing for its bid from nine banks. The lead underwriters are understood to be Citigroup, Deutsche Bank and Barclays. Kraft declined to comment.
Reporting third-quarter results after the bell, Irene Rosenfeld, the company’s chairman and chief executive, reiterated her interest in Cadbury. “We remain interested but will maintain a disciplined approach,” she said, as the company trimmed its sales forecast from 3 per cent to 2 per cent but unveiled profits significantly ahead of analysts’ expectations.
Kraft shares fell nearly 3 per cent to $26.75 in after-hours trading soon after the announcement of its third-quarter results, which have been eagerly anticipated by markets, as the company’s proposed offer for Cadbury, made in September, contains a share element. This is significantly below the $28.10 they were at before the Cadbury proposal was announced.

Ms Rosenfeld said Kraft continued speaking to shareholders of both companies and reviewing potential financing options for its £10.6 billion bid.
The American foodmaker, which already owns a number of British brands, including Terry’s Chocolate Orange, offered 745p a share for Cadbury in September in cash and shares. The bid was swiftly rebuffed by Cadbury, which described the proposal as an “unappealing prospect”.
“There has been a lot of speculation about what we can afford,” Ms Rosenfeld said last night during a conference call for analysts and investors. “What we can afford is not relevant. What is relevant is what Cadbury is worth.”
That alone, she added, would determine Kraft’s approach to the bid for Cadbury, which makes Creme Eggs and Dairy Milk and has a big American shareholder base.
“Our criteria include accretion to cash EPS [earnings per share] in the second year, delivering a return on investment well in excess of our cost of capital, and maintaining both our investment grade credit rating and our dividend.”
Kraft faces a November 9 deadline, set by the UK Takeover panel, to issue a formal bid for Cadbury or walk away from the deal for six months. It has been widely expected to unveil an off-er in time to meet the deadline, but last night’s fall in the share price could complicate the process.
Kraft, whose brands include Oreo cookies, Philadelphia cream cheese, Maxwell House and Jacobs coffee, posted third-quarter earnings of $826 million, or 55 cents a share. This compares with last year’s figures of $1.36 billion, or 91 cents a share, which included a 57 cents a share gain from the sale of Kraft’s Post cereals.
Revenue fell 5.7 per cent to $9.8 billion. Ms Rosenfeld said the company’s organic net revenues grew by half a per cent, held back by lower food prices, which were the result of lower dairy costs during the quarter.
Revenue was also hit by the company’s decision to discontinue some of its less profitable lines and to focus on premier brands instead.
The company raised its profit forecast by 4 cents to $1.97 a share, but this improvement depends in part on a lower expected tax bill, rather than on pure revenue growth.
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