BGN Entrepreneur

Ferrero moved a step closer to gatecrashing the £10.5 billion bid battle for Cadbury last night after the Italian chocolate maker lined up a bumper loan that could be used to back an offer for the British confectionery group.
Ferrero, which makes Nutella spreads and Kinder chocolate eggs, is talking to the Italian bank Mediobanca about taking on a $4.5 billion loan that would be syndicated to at least four other big lenders.
The loan would be structured in two tranches and would most likely be extended to a new company controlled by Ferrero. Other banks considering taking part in the loan are thought to include domestic players Intesa Sanpaolo and Unicredit.
Ferrero, which in November said it was considering its options over a potential bid for Cadbury, has until February 2 to table a formal offer. Cadbury is fending off a hostile cash and shares bid from Kraft of the US. It has reportedly dismissed the bid as “derisory” but it remains the only formal offer on the table.
Ferrero has been tipped as more likely to join forces with another bidder, such as Hershey of the US, rather than try to mount a counter-bid for Cadbury on its own. The difficulties of agreeing partnerships and lining up funding were last week said to be dampening both companies’ interest in launching a rival bid, but the emergence of the loan for Ferrero suggests it is still a possibility.
The takeover battle for Cadbury, which has been raging since Kraft made its first informal approach in September, is at a turning point. This week, Cadbury will publish its final defense against Kraft’s bid, which is expected to focus on the American company’s poor share price performance since its demerger from the Philip Morris tobacco giant in 2001. Kraft shares, worth $31 at the time of the demerger, were changing hands for just above $27 last week.
Cadbury will also this week publish its final results for the past year, which are expected to show encouraging growth in sales and profits. Cadbury has already said it is confident that it can increase its annual revenues by between 5% and 7%. It is also aiming to increase profit margins to at least 16% by 2013. Double-digit dividend growth is promised. Cadbury shares closed last week at 778p, higher than the current value of Kraft’s offer, with shareholders making it clear that the American group must bid at least 800p a share for any chance of success.
Kraft has already improved its offer once, increasing the cash component of its bid to 360p a share last week and is thought to be looking at ways of raising the offer further. However, it has come under pressure, not least from Warren Buffett, whose Berkshire Hathaway investment group is its largest shareholder, not to overpay.
Kraft is expected to wait until late next week before making its move. It has until January 19 to present its best bid, with a deadline for acceptances in early February. Cadbury has already made it clear that it believes a combination with Hershey would be a better fit for the two companies.

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