By Ken Sweet
FOXBusiness
Friday, January 22, 2010
Pennsylvania chocolate maker Hershey (HSY: 36.78, 0.59, 1.63%) said Friday that it does not intend to make a competing bid for Cadbury (CBY: 53.58, -0.32, -0.59%), leaving Kraft’s (KFT: 28.0175, -0.2025, -0.72%) bid as the only option available for the British confectionery maker.
Hershey was required by U.K. takeover laws to announce a formal bid or withdraw from the competition for six months. Kraft and Cadbury announced a friendly transaction on Tuesday that would allow Kraft to purchase Cadbury for $19.4 billion.
Hershey gave no reason for its withdraw from the competition, but said if there a “material change in circumstances” regarding Kraft’s bid for Cadbury it would reevaluate its options.
With Hershey formally withdrawing from the competition, Kraft now is the only major company with a bid for Cadbury. While some Kraft shareholders like Warren Buffett are against the idea of Kraft purchasing Cadbury, Kraft does not need shareholder approval for the transaction.
Hershey is now in a vulnerable position. Several of its major competitors like privately-owned Mars. Inc. have grown in size from acquisitions in recent years while Hershey remains a mostly domestic chocolate maker.
It was considered that Hershey was too small to buy Cadbury on its own. Hershey executives reportedly pondered the idea of going in for a joint bid for Cadbury for several months, possibly with Italian chocolatier Ferrero SpA or with another company. None of those ideas came to fruition.
The Wall Street Journal reported earlier this week that Hershey may eventually have to sell its business to a foreign competitor, such as Swiss company Nestle.
Hershey was down 0.1% in early Friday trading to $36.14 a share, Kraft shares were lower by 0.9% to $28.00 and Cadbury shares were down 0.74% to $53.44.
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