Hershey Decides Against Cadbury Counterbid

Hershey has decided against launching a counterbid for Cadbury after a unanimous vote by its board late Wednesday, according to reports.
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NEW YORK (

TheStreet

) --

Hershey

(HSY) - Get Report

has decided against launching a counterbid for

Cadbury

(CBY)

after a unanimous vote by its board late Wednesday the

Financial Times

newspaper reported.

Hershey

had been interested in making a bid for the British confectioner,

but decided against this after U.S. food giant

Kraft

(KFT)

approached Cadbury with a sweetened offer that Cadbury shareholders agreed to.

Hershey had until January 23 to decide on a counteroffer. Before Kraft emerged with a sweetened offer, Hershey had been wrapping up a financing package last Friday. It was reportedly considering a counteroffer of at least $17.9 billion.

The improved offer from Kraft values the deal at at about 11.9 billion pounds ($19.5 billion). Kraft said said the offer values Cadbury at 840 pence a share. Cadbury shareholders also will be entitled to a special dividend of 10 pence a share. Kraft's previous offer for Cadbury was valued at slightly more than $17 billion, which Cadbury had outright rejected as "derisory."

The agreement between Kraft and Cadbury would end a four-month takeover battle for Cadbury and result in the world's largest candy-maker. Furthermore, the deal ends two centuries of independence for the U.K.'s largest confectioner.

To fund the cash offer of £5.00 per Cadbury share, Kraft will likely utilize the full £5.5 billion commitment under its bridge loan (£3.89), proceeds from the pending sale of its pizza business (£0.60) and its own resources (£0.51), according to CreditSights.

CreditSights notes that by combining the debt balances of Kraft and Cadbury with the bridge loan, the research firm has arrived at a pro-forma debt balance of $31.3 billion. CrediSights says that with pro-forma EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of $7.2 billion, the research firm calculates a total leverage ratio of 4.3x and net leverage ratio of 4.0x.

"While Kraft's pro-forma leverage levels would stretch its ratings to cross-over territory, we believe high-grade ratings will be retained," CreditSights noted. "We maintain the view that the ratings agencies will provide the combined entity time to integrate and delever, given their industry-leading market positions, strong brands and solid free cash flow generation."

-- Reported by Andrea Tse in New York

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