Hershey To Make Solo Bid For Cadbury

The Hershey Company (NYSE: HSY) is preparing a bid to buy British candy maker Cadbury PLC (NYSE: CBY), according to a source with knowledge of Hershey's plans.

The company was preparing two possible bids, one with the aid of Italian candy maker Ferrero International and one without. It now looks as if Hershey will go it alone in its bid for the rival British candy maker.

The two companies had informed the London Stock Exchange in November last year that they were considering making a joint bid for Cadbury but indications are that Ferrero is no longer interested in a possible acquisition.

Il Sole 24 Ore, an Italian business paper, reported that Ferrero was no longer considering bidding for Cadbury. The paper cited sources close to the family run business but would not name them.

In order to pull off a deal by itself, Hershey would need to take on a great deal of debt and possibly issue new shares. However, the Hershey Trust Co. has said that it will not give up voting control of Hershey Co., which limits Hershey's options of financing a merger or acquisition.

Meanwhile, Kraft Foods Inc. (NYSE: KFT) was moving ahead with its hostile takeover attempt of Cadbury. Kraft's current bid stands at $16.5 billion but it may raise the bid in order to win over more Cadbury shareholders and discourage other companies from entering a bidding war.

However, analysts and Kraft's biggest shareholder, billionaire investor Warren Buffet, are worried that raising the bid will result in the company overpaying and will reduce any possible long term gains.

Cadbury itself is vehemently opposed to a takeover by Kraft. Hershey Company is waiting to see how Cadbury shareholders react to Kraft's bid before moving ahead with a bid of its own.