Kraft still favorite for Cadbury deal: Bernstein

LONDON Tue Dec 1, 2009 4:59am EST

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LONDON (Reuters) - Kraft Foods Inc KFT.N is favorite to take over Cadbury Plc CBRY.L despite interest from Hershey Co (HSY.N) and Ferrero, and talk of Nestle SA (NESN.VX) involvement, said analyst Andrew Wood at Sanford Bernstein.

"Kraft is still the favorite to get the deal done ... but not at the 'steal' it had originally hoped," said the top-rated analyst in a note on Tuesday, which still said the right price for Cadbury is 900 pence per share.

Wood said he believes a Hershey/Ferrero bid would fall short but should force Kraft to pay a higher price, while Nestle's interest would only be on the coat-tails of a Hershey bid to try to get back its KitKat brand in the United States.

"We think a merger of Cadbury and Hershey would be bad news for Cadbury and its shareholders and would probably be rejected by the shareholders," Wood said.

Kraft made the only official bid for Cadbury in early November. Its cash and shares offer values Cadbury at 717 pence or 9.8 billion pounds ($16.1 billion), while Hershey and Ferrero have said they are considering making bids.

Cadbury shares were up 0.1 percent at 807 pence at 0915 GMT in a firmer UK stock market.

Cadbury has rejected the Kraft offer but Chief Executive Todd Stitzer has warmed to a Hershey tie-up, saying in a weekend interview with the Financial Times: "I would prefer Cadbury to be in an environment where its values and principles could continue."

Kraft has until December 7 to post its offer document to shareholders and then will have 60 days to persuade them to accept the bid under UK takeover rules. Kraft will have up to Day 46 to raise its bid once the 60-day timetable has started.

Nestle has been cited by analysts as a possible bidder for Cadbury, but is unlikely to bid alone for anti-trust reasons and has been seen as a possible partner for Hershey. The Swiss food group has declined to comment on Cadbury.

(Reporting by David Jones; Editing by David Holmes)

($1 = 0.6070 pound)

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