Cadbury steps up Kraft defence bid

British confectioner Cadbury yesterday stepped up its defence against a takeover by US giant Kraft Foods by upgrading its full-year sales forecast after a third-quarter rise.

"The strength of our operating performance continues to underpin the board's confidence in both our growth prospects and the potential for creating further, material shareholder value," Cadbury chairman Roger Carr said in a trading update.

In reaction to a seven-per cent gain in third-quarter sales, Cadbury upgraded its 2009 revenue forecast to the middle of its four to six per cent range from the previous lower-end forecast.

"This puts the ball firmly back in Kraft's court, and is exactly what Cadbury shareholders would have hoped for," Panmure Gordon analysts wrote in a note to clients.

"We think this statement, plus confidence expressed about 2010 and 2011, significantly reduces the chance of Cadbury being acquired 'on the cheap' and as such we raised our target price from 860p (pence) to 900p."

A stronger sales outlook makes a take-over of Cadbury less attractive to its shareholders, who are likely to judge that the company is profitable enough without being merged with a bigger company.

"As expected, Cadbury is using this positive trading statement as part of its defence against the Kraft bid," said Cazenove analyst Polly Barclay.

Kraft Foods has until November 9 to lodge a formal takeover bid for Cadbury, Britain's takeover watchdog ordered last month.

Kraft had made an informal £10.2 billion (€ 11.7 billion) offer for Cadbury in September. But Cadbury, led by American chief executive Todd Stitzer, rejected the bid, arguing that it "fundamentally undervalued" the group.

Should Kraft fail to make a formal offer before the November 9 deadline, it would be unable to do so again for at least six months, according to British take-over rules.

Cadbury is the world's second biggest confectionery company behind Mars and its chocolate brands include Dairy Milk chocolate and Trident chewing gum.

Kraft, the world's second biggest snacks group after Nestlè, makes numerous snack products including Oreo cookies, Kenco coffee and Milka chocolate.

The US firm had proposed to pay 300 pence in cash and 0.2589 new Kraft Foods shares per Cadbury share. This valued each Cadbury share at 745 pence.