By JEFFREY MCCRACKEN, DANA CIMILLUCA And ILAN BRAT
Board members at Cadbury PLC, resisting a hostile takeover effort from Kraft Foods Inc., have held talks with board members at Hershey Co. to encourage a rival offer, several people familiar with the matter said.
Cadbury board members have told Hershey directors that they would support a bid from the Pennsylvania company and have provided some guidance on the kind of price that would draw board support, these people said.
“Cadbury wants a friendly deal, a white knight as an option, so there are ongoing, back-channel talks,” said one of these people.
Cadbury board members and Chief Executive Todd Stitzer have said publicly and privately that they see Hershey as a better fit than Kraft. At the very least, a Hershey bid could push Kraft to raise its own offer.
Conversations between the two sides have been going on for about a month, but they have become “more frequent and more open” in recent weeks, one of the people said.
In December, Hershey’s board formed a special committee of outside directors to examine an offer. Those directors don’t sit on the separate Milton Hershey School & School Trust board, which has voting control over the publicly traded company.
The conversations have gone on among board members, bypassing bankers and advisers to the companies, said three people familiar with the matter. It could not be determined which board members have been involved in the talks.
A public statement Tuesday morning by investor Warren Buffet, Kraft’s largest shareholder, that he wouldn’t support the issuance of new Kraft shares has “heartened” Hershey and its advisors that the company could make a competitive rival bid, said another person familiar with the matter.
“It gives them conviction they can win, that Kraft now has fewer degrees of freedom than previously thought,” said one person involved in the matter.
One person familiar with the matter cautioned that any talks between Cadbury and Hershey aren’t Detailed and that Cadbury’s primary interest is to remain independent. According to U.K. takeover rules, should Cadbury open its books to Hershey as part of such discussions, it would have to do the same for Kraft. Kraft and Cadbury are not currently in discussions, the person said, and the odds that Cadbury and Kraft will begin talking anytime soon about a friendly deal appear slim.
Though Cadbury officials have argued that Hershey and Cadbury would be a better operational and cultural fit, they stress that the final decision on any deal will simply come down to who offers the greatest value.
Michael Mitchell, a Kraft spokesman, said, “Currently we’re the only offer on the table. We’re not going to speculate about what others may or may not be doing.
Representatives for Cadbury, Hershey and the Hershey Trust declined to comment.
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