Cadbury's ready to fight off Kraft's hostile bid

Dec 14 2009 By Iain Laing, The Journal

US FOOD giant Kraft's hostile bid for Cadbury will be back in the spotlight in a week which is also expected to see some positive economic data.

Dairy Milk maker Cadbury is likely to be in fighting mood when it launches its defence against a £10bn hostile takeover bid from US firm Kraft today (Monday).

The firm’s chairman Roger Carr has already dismissed Kraft’s initial bid as derisory and not even remotely close to the true value of the firm. Cadbury will hope to convince its shareholders, including some 50,000 private investors, of its view that it has strong prospects as a standalone company.

Kraft values Cadbury at around 713p a share – equivalent to £10.1bn – although Cadbury’s shares have been trading around the 790p level recently. It is believed Cadbury is looking for an offer closer to 850p a share.

While Kraft recently disappointed with weak third-quarter results, downgrading revenues guidance Cadbury came out fighting with an impressive 7% hike in like-for-like sales.

It is thought the bid could smoke out offers from other firms and confectioners Hershey and Ferrero have already expressed an interest.

Another encouraging update is expected from leisure group Whitbread today (Monday) as analysts eye continued improvement across its businesses.

Whitbread – which owns the Costa coffee chain, Premier Inn budget hotels and a pubs restaurant division – posted better than expected half-year results in October, with a 3% decline in underlying pre-tax profits to £118.2bn.

Its quarterly results are predicted to show the continuation of strong trading at Costa, which produced a 70% rise in operating profits in the six months to August 27 on revenues up 21% to £155.4m.

Music group Chrysalis is expected to move into profit when it releases its full-year figures on Thursday, after chart successes from current artists as well as re-released Beatles recordings.

Analysts now predict Chrysalis will post pre-tax profits of £200,000 before one-off items in the year to September 30, from a loss of £1.1m the previous year - its first as a focused music and distribution group.

Chrysalis whetted the market’s appetite in August with news that Rod Temperton, the writer behind Michael Jackson hits such as Thriller and Rock with You, was on its books. This is expected to offer a stream of lucrative royalties following the singer’s death.

Consensus forecasts indicate a rise in the Consumer Prices Index (CPI) to 1.8% – up from 1.5% the previous month – mainly due to higher petrol costs.

CPI was at a five-year low of 1.1% in September but the Bank of England’s benchmark is set to rise further still to around 3% in the new year as VAT returns to 17.5%, although this should ease back as the year progresses.

Wednesday’s unemployment figures, meanwhile, should show a rise of 30,000 to around 2.5 million in the three months to October.

Official retail figures are also likely to show a further increase after October data revealed sales 3.4% up on the same month last year – the biggest year-on-year rise since May 2008 at the beginning of the recession.

Friday brings the first snapshot of the dire public finances since the Pre-Budget Report lifted borrowing forecasts to £178bn for the current year.

Consensus forecasts suggest a £23bn rise in net borrowing during November – a generally poor month for the public finances – taking the total for the eight months of the year so far to around £110bn.