Cadbury has unveiled ambitious new growth targets for its business in a document urging shareholders to reject a “wholly inadequate” offer from Kraft.
Cadbury used its defence document issued this morning to set out fresh growth targets, including: increasing organic revenue growth targets from 4-6% a year to 5-7% per year; improving operating margins from the mid-teens to 16-18% by 2013; and generating double-digit growth in dividends per share from 2010 onwards.
City analysts have described the targets as “credible” - though stretching.
Its board unanimously urged shareholders to reject Kraft’s 718p a share offer, which it claimed “substantially undervalued” the company.
Roger Carr, chairman of Cadbury, accused Kraft of trying to buy Cadbury on the cheap to provide much needed growth to its “unattractive low-growth conglomerate business model”.
He added: “Cadbury is an exceptional business worth much more than the offer put forward by Kraft. Don’t let Kraft steal your company with its derisory offer.”
Trade union Unite also urged shareholders to reject the deal, despite Kraft’s commitment to retain manufacturing at Cadbury’s Somerdale plant - which Cadbury has earmarked for closure.
Jennie Formby, Unite national officer for the food industry, said: “This offer is not in the best interests of either shareholders or the UK, and certainly not the employees. It would saddle the company with excessive debt, compromise investment and certainly mean instability with attacks on jobs, wages and conditions.”
Although Kraft’s opening gambit in its bid to acquire Cadbury included a proposal to keep Somerdale open, “preserving UK manufacturing jobs”, it had not given the union any detailed reassurances about jobs in other plants, added a Unite spokeswoman. “We‘ve repeatedly sought assurances from Kraft about jobs in other Cadbury plants, especially the 1,200 people working for Cadbury in Ireland, and they have not been able to provide any details about their plans.”
The Somerdale factory, which produces Fudge, Curly Wurly, Turkish Delight and Mini Eggs, has been earmarked for closure next year by Cadbury as part of a cost-cutting plan, with production switching primarily to Poland.
Unite has in the past claimed that this would generate millions of unnecessary food miles with 18-19 trucks travelling from Poland back to the UK every day.
Over the weekend the BBC reported that Cadbury had held talks with US rival Hershey about a possible bid. If the discussions result in Hershey making a higher offer than Kraft, Cadbury may recommend the new bid to shareholders.
Kraft has been awaiting the Cadbury riposte before showing its hand, but analysts predict it will be under pressure to significantly increase its offer. It has until January 19 to up its bid. Credit Suisse analysts said last week that Cadbury would be failing in its "fiduciary duty" if it accepted anything less than 850p a share.