Friday November 20, 2009

Analysts Weigh Possible Cadbury Deals

Cleveland — Speculation continues in the global financial and confectionery markets with analysts offering compelling reasons for The Hershey Co. and Ferrero SpA to mount a joint bid for Cadbury plc.

While many claim the combination makes strategic and geographical sense, Candy & Snack TODAY sources also say the distinct ownership structure of both Hershey and Ferrero could present challenges to such a union.

With $5.1 billion in annual sales, Hershey is controlled by a trust, with a charter that mandates it maintain a majority stake in the company’s stock. Analysts suggest a Cadbury bid might require adopting a new charter that could significantly reduce The Hershey Trust’s control of the iconic U.S. company.

And Ferrero, a private, family-held enterprise with $8.9 billion in sales last year, is thought by sources to be facing its own challenges based on a business model that has previously ignored merger and acquisition opportunities.

A deal with Cadbury, analysts offer, could bolster Hershey’s sales outside the U.S. and afford it access to faster-growing gum and candy markets such as in India and China.

It could also give the companies a combined global market share of more than 15 percent and the might to compete more equitably worldwide with Mars, Inc., Nestle S.A. and Kraft Foods, Inc.

In addition, Cadbury and Hershey have a history of business discussions that took place back in 2002.