Cadbury keeps investors sweet as it bids to repel Kraft takeover

BID target Cadbury is likely to say it has outstripped its previous sales and profit margin targets for 2009 as the confectionery group defends itself against the hostile £10.5 billion offer from Kraft Foods next week.

City analysts say Cadbury is virtually certain to ramp up its previous forecasts for a 2009 operating margin of 13.3 per cent and underlying sales growth last year of about 5 per cent.

The company is also expected to paint an upbeat picture for its prospects this year when it puts out its trading update next Friday – the last date under City Takeover Panel rules when it can produce material new information to try and fend off the takeover.

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Kraft then has until the following Tuesday, 19 January, to decide whether to increase its offer, whose deadline is 2 February. The first closing date for Kraft's offer passed last Tuesday when the American predator received only 1.52 per cent of acceptances.

One industry analyst said: "The key will be what Cadbury can say to boost the long-term strategic value of the business and how much more Kraft will be willing to pay."

Most analysts believe Kraft will still need to raise its bid to win the British group, which has claimed the current bid is an opportunistic attempt to buy it "on the cheap".

Cadbury is expected to say that good Christmas trading and greater than expected costcutting has allowed it to beat its previous targets for sales and margin growth last year.

Kraft's cash-and-shares offer has gained in value over the past few days as the US food company's stock has risen and the dollar strengthened to make the offer currently worth 768p for each Cadbury share. That compares with a Cadbury closing price yesterday of 778p. Some institutional investors have said privately that Kraft will have to raise the bid to at least 800p to succeed.

Hopes of an eleventh-hour white-knight bidder for the British group, which have ranged from Swiss giant Nestl to Hershey of America and Italy's Ferrero, look to be fading fast. "The focus will be on the value of Cadbury rather than looking for any white knight bidders," said another analyst.

Nestl ruled itself out of any Cadbury auction last week, when it sold its American frozen pizza business to Kraft instead, thereby giving the American company greater funds to increase its bid if desired.

However, Kraft chief executive Irene Rosenfeld was also publicly embarrassed last week when her group's biggest shareholder, legendary investor Warren Buffett, warned her not to overpay for the Cadbury acquisition with the "blank cheque" of a large issue of new Kraft shares. Buffett's Berkshire Hathaway speaks for more than 9 per cent of Kraft.

Cadbury has forecast 2009 sales rising 11 per cent to 6bn, and underlying operating profit up 24 per cent to 794m.

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