HARRISBURG, Pa. — The Hershey Co. is assembling a bid to acquire British candy maker Cadbury PLC without the help of Italian candy maker Ferrero International, a person familiar with Hershey's plans told The Associated Press on Wednesday.
Meanwhile, the company that bid first, American food giant Kraft, continued to defend its offer and issued an earnings forecast that may have been intended to show off its strength.
Hershey has been working on two parallel bids for Cadbury — one with Ferrero and one on its own. But Ferrero reportedly has withdrawn. Hershey is still crafting its own potential bid, one designed to top the $16.5 billion hostile offer from Kraft Foods Inc., the person familiar with Hershey said.
The person, who spoke on condition of anonymity because the person was not authorized to speak publicly about the matter, said Hershey hoped to avoid a bidding war by waiting until Cadbury's shareholders make a decision on Kraft's bid.
Kraft has until Feb. 2 to win support from a majority of shareholders. It said last week that it had received acceptance from holders of 1.5 percent of Cadbury shares to date. Kraft's deadline to increase its bid is Jan. 19.
A spokesman for the maker of Hershey's Kisses and Reese's peanut butter cups said that, as a matter of policy, the company does not comment on merger and acquisition issues.
Cadbury shares rose, adding 12.5 pence, or 1.6 percent, to close at 789.50 on the London Stock Exchange. Hershey shares fell $1.14 to $36.61 in trading Wednesday.
An Italian business daily reported Wednesday that Ferrero International SA is no longer interested in bidding for Cadbury. The paper, il Sole 24 Ore, cited unidentified sources close to the family-run Italian firm.
Ferrero did not comment on the report.
Any bid for Cadbury would involve bringing jobs and assets to Hershey, while voting control of the company would remain with the charitable trust set up by its late founder, Milton S. Hershey, the person said.
In addition to borrowing money, a Hershey acquisition of Cadbury may require the issuance of new shares. However, the Hershey Trust Co. has maintained that it will not give up control of the company, a stance that analysts say limits the company's flexibility to grow through a merger.
In November, Hershey and Ferrero told the London Stock Exchange they were considering an offer for Cadbury but cautioned one might not materialize.
Without a well-financed partner, analysts question how Hershey, America's most recognizable name in chocolate, alone can afford the acquisition of the larger Cadbury.
Hershey posted revenue of $5.13 billion in 2008, while Cadbury reported $7.8 billion in 2008.
On Wednesday, Kraft maintained that it would be the best partner for Cadbury. Kraft shares fell 6 cents to $29.23.
If Kraft does win Cadbury, it would combine the world's second-largest food maker with one of the world's largest confectioners.
But Kraft, based in Northfield, Ill., is under pressure from its biggest shareholder, billionaire investor Warren Buffett, not to sweeten its offer with more shares, which he believes are undervalued. And it's unclear what move Kraft will make now.
Analysts — worrying Kraft will overpay if it gets into a bidding war and wouldn't see long-term gains from an acquisition as a result — have been cautious.
Cadbury has staunchly opposed a Kraft takeover. On Tuesday, Cadbury's brass again urged shareholders to vote against the deal and criticized Kraft's business model.
But Tuesday's boost in Kraft's full-year profit outlook was the second in two months. After logging profit gains, Kraft now expects to report earning at least $2 per share for 2009. It earlier forecast profit of at least $1.97 per share. The new outlook is in line with analyst expectations, but some analysts were critical.
"It's a blatant attempt to spin the news," said D.A. Davidson & Co. analyst Tim Ramey. Kraft moved its guidance to meet Wall Street expectations on a quarter that ended two weeks ago, he said.
Kraft may also be setting the stage for a graceful exit from bidding for Cadbury.
CEO Irene Rosenfeld said the company will be able to deliver "sustainable top-tier performance, with or without Cadbury."
Skidmore reported from Portland, Ore.