Hershey and Ferrero eye Cadbury, lack dough

Just when Kraft Foods was in the hope of capturing Cadbury, an obstruction came in its way, in the form of Hershey Co. and Ferrero International.

Both the companies recently confirmed that they were now in line to make offers for the $16.7 billion bid and give competition to Kraft.

The news bought fresh optimism in the share market raising the price of Cadbury shares by 1.2 percent. Shore Capital’s Darren Shirley says, “There’ll be plenty of ups and downs for Cadbury’s shares over the coming months.”

Despite the cheer, the deal seems to be a remote possibility. Both the chocolate makers are hopeful of grabbing the offer, but there are many stumbling blocks on the way, like poor funding options, limited earnings, and the type of ownership structure for both the firms, to name a few.

Hershey has also not got any clear strategic plan till now. Many experts are advising the use of private equity at this stage since both the companies don’t have many funds in their kitty.

Others believe that the tie up between Ferrero-Hershey will not be profitable for Cadbury in the long run.

Financial Times’ Lex column writes it would be better for Cadbury to partner with Nestle. The column adds, “To the distress of Cadbury shareholders hoping for a more full-fat alternative to Kraft’s cheeseparing bid, the likelihood of a Ferrero or Hershey offer – separately or jointly – remains slim.”