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Hershey Is Said to Accelerate Efforts to Prepare Cadbury Offer


Jan. 15 (Bloomberg) — Hershey Co. is stepping up efforts to prepare a bid for Cadbury Plc and plans to make a decision after Kraft Foods Inc.’s final offer for the U.K. chocolate maker, according to people with knowledge of the matter.

Hershey has been in talks with credit-ratings companies in recent days about how to structure a bid without imperiling its investment-grade debt rating, said the people, who declined to be identified because the talks are private. It’s also been drafting commitment letters with its lenders, JPMorgan Chase & Co. and Bank of America Corp., to secure a multi-billion-dollar loan package, the people said.

Board members from Cadbury, led by Chief Executive Officer Todd Stitzer, and Hershey, headed by CEO David West, have discussed a combination, said the people. Hershey recently reaffirmed its interest, Cadbury Chairman Roger Carr said yesterday on a conference call.

An offer would challenge Kraft’s 10.9 billion-pound ($17.8 billion) hostile bid and would involve swallowing a company more than twice Hershey’s size. Standard & Poor’s has an A rating on Hershey’s debt, or five levels above junk, with a negative outlook.

Kraft has until Jan. 19 under U.K. law to raise its offer, and Hershey may conclude that a higher Kraft bid puts the maker of Dairy Milk chocolate and Creme Eggs out of its reach, the people said. Hershey will have another four days, until Jan. 23, to decide whether to enter the fray. In addition to financing the bid through loans and new Hershey shares, the company is also trying to raise cash by selling equity stakes to new investors, the people said.

Resolving Differences

Hershey, based in the Pennsylvania town of the same name, had been locked in talks for months over how to respond to Kraft’s offer, first made public in September. While board members weren’t able to agree on whether to move forward with a bid as recently as this month, they made progress in resolving their differences in the past two weeks, the people said.

The Hershey Trust holds about 80 percent of Hershey’s voting power and 31 percent of common shares.

Hershey, which distributes Cadbury products in the U.S., rose 35 cents to $36.96 yesterday in New York Stock Exchange composite trading, while Uxbridge, England-based Cadbury increased 9.5 pence, or 1.2 percent, to 799 pence in London. Kraft, based in Northfield, Illinois, fell 11 cents to $29.12 in New York. Based on that closing price, Kraft’s cash-and-stock offer values Cadbury at 762 pence a share.

Hershey has been using former Goldman Sachs Group Inc. banker Byron Trott and his new firm, BDT Capital Partners, to look for the new equity investors, which could include wealthy individuals, the people said.