Cadbury chief urged to prove value of rejecting Kraft takeover

Published on Saturday 17 October 2009 13:49

TODD Stitzer, chief executive of Cadbury, will this week face pressure from shareholders to prove that Britain's favourite chocolate manufacturer can deliver strong growth as an independent company, as a renewed takeover bid from US food giant Kraft looms.

Kraft, whose initial 10.2 billion approach was rejected by Stitzer last month, has been given until 9 November by the Takeover Panel to make a final offer for Cadbury. It is understood to be in advanced talks with seven banks about funding a renewed bid.

Although Cadbury has stood firm in its rejection of Kraft, criticising the firm's "low growth" model, analysts say investors want Stitzer to prove the value of staying independent.

Numis analyst Nicholas Ceron said: "We believe the group is under pressure to deliver strong organic growth to demonstrate its ability to perform strongly as a standalone company."

Cadbury presents its latest quarterly sales figures on Wednesday, and investors will be able to make a direct comparison with Kraft's growth when it updates the US markets with its own sales progress in the first week of November.

At Cadbury's half-year results in July, Stitzer said profits for the full financial year were likely to beat expectations as recession-hit Britons turned to old favourites, such as the relaunched Wispa, for comfort. First-half revenues rose by 12 per cent.

But analysts at JP Morgan have warned that Cadbury has been "tracking below sales guidance since July". Pablo Zuanic of JP Morgan pointed out that data from the market research group Nielsen showed Cadbury sales gained by only 3 per cent in July, compared with the 16 per cent surge reported in the first six months of the year. The company has averaged 6.1 per cent sales growth in the past 12 weeks, Zuanic said. He put the difference in first-half figures down to the long Easter season when Cadbury traditionally performs well.

The City had predicted a bidding war over Cadbury, expecting rivals such as Hershey, Nestl and PepsiCo to enter the fray. But analysts say the likelihood of a rival bid is looking increasingly remote.