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After rejecting a $16.7 billion acquisition offer from Kraft Foods on Monday, Cadbury must set out a clear growth strategy to justify its decision, according to a British retail consultancy that is following the company’s actions.
The hostile takeover bid was almost immediately rejected by Cadbury as “fundamentally inadequate,” although Kraft CEO Irene Rosenfeld appeared open to raising the offer, according to press reports, which also suggest other candy manufacturers Nestlé and Hershey may launch rival bids for the British confectionery firm.
Verdict Consulting, based in London, said it viewed Kraft’s offer as representing “full and fair” value for Cadbury, as well as significantly above the current share price and “indeed, a way above the value of the company since it spun off its drinks division last year.”
Kraft said that the acquisition would create “a global powerhouse in snacks, confectionery and quick meals,” and would save the company more than $600 million in marketing and distribution costs.
According to Verdict’s consulting director, Neil Saunders, the logic of the deal is compelling, as it would allow the combined entity to compete more effectively, especially against Nestlé. “The brand portfolios of the two groups complement each other perfectly with minimal overlap,” said Saunders, who added that in rejecting the Kraft bid Cadbury must now set out clear reasons for the rejection and indicate how it intends to grow over the next five years.