Chocolate giants sweet talk over new bid for Cadbury

The standoff between global food and confectionery giants Kraft Foods and Cadbury has taken a new twist with rumoured talks of a new takeover bid from chocolate companies Hershey and Ferrero.

The Wall Street Journal, quoting sources said to be familiar with the matter, says high-level talks have been going on for several weeks.

Last week, Cadbury described a hostile $US16.7 cash and shares bid from Kraft as “derisory” but since Kraft’s intentions were made public in September no rival bidders have surfaced – until now.

Ferrero is a privately held Italian company whose eponymous chocolate products are widely available in New Zealand, not to mention Tic Tac sweets and Nutella spread.

Hershey is the largest US chocolate maker, is owned by a charitable trust and manufactures Cadbury products for the American market under licence.

The scale of the two companies is much less than Kraft but they are focused on Cadbury's core chocolate business (its other is chewing gum).

The talks are bound to centre on whether the two can muster the financial resources to outbid Kraft, which has most of its funding already wrapped up.

The Journal reports: “So far, talks between executives at the two firms have not produced an offer and it is unclear whether they will, these people said. The two sides have been in talks for several weeks with Hershey executives more aggressive about pursuing a deal, these people added.”

The newspaper adds that the main sticking point so far is which party would end up taking hold of Cadbury's higher-margin Trident gum business.

Putting together Ferrero and Cadbury operations could pose cost-cutting opportunities in Europe, said a research note from Nomura Securities that was responding to media speculation about a possible Ferrero-Cadbury tie-up.

"As an entirely family controlled entity it is very difficult to gauge Ferrero's thinking here," the Nomura analysis said. "But being left on the sidelines of consolidation taking place around them can't be an attractive proposition."