Hershey likely to bid for Cadbury

Hershey is likely to make a bid of roughly $18 billion for the UK confectioner Cadbury, it has been reported.  According to the Wall Street Journal, Hershey is putting the finishing touches on a financial package that is based on a loan of approximately $10 billion from banks including JP Morgan Chase and Bank of America Merrill Lynch.  The WSJ also says the offer is likely to include $5 billion in new Hershey shares and at least $3 billion from private investors.  The bid would be worth 800p to 820p per Cadbury share, compared with KraftÔÇÖs 770p a share market value of about 794p.  HersheyÔÇÖs controlling shareholder is a trust that oversees the Milton Hershey School in Pennsylvannia.  Cadbury has described KraftÔÇÖs bid as ÔÇ£derisoryÔÇØ, asserting that shareholders would not even look at an offer unless it were at least 800p a share.  Many of CadburyÔÇÖs shareholders are hedge funds seeking a quick profit.It is thought that an offer from Hershey would receive a friendlier reception from Cadbury than that of its Illinois-based rival Kraft. The operational benefits of a deal between Hershey and Cadbury are clear, since Hershey already makes Cadbury-branded confectionary in the US under license.  The US accounts for 85 percent of Hershey's sales, so Cadbury could help to significantly boost the Pennsylvanian brand overseas.It is also clear that a counter-bid from Hershey makes a bidding war possible, as opposed to a single bid from Kraft.  Hershey has until January 23 to submit its offer; however, it is believed that the company will not make a bid until it has some form of assurance from Cadbury that it would be accepted.  Kraft has until tomorrow to increase its offer under UK takeover rules. However, there are doubts that the company has enough shareholder support to do so, especially in the light of investor Warren BuffetÔÇÖs high-profile rejection of the whole approach.  Kraft then has until early February to persuade Cadbury shareholders to accept its bid.