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Is Hershey set to go it alone?

American confectioner Hershey is rumoured to be in talks with bankers this weekend over a possible £10.3 billion bid for UK outfit Cadbury which is currently the target of a £9.9 billion bid from US counterpart Kraft Foods. The rumoured bid from Hershey equates to around £7.50 a share against a £7.25 bid currently on the table from Kraft Foods but it is still well below the eight pound share price of Cadbury at the moment. So what next?

While it may seem rather bizarre that Hershey is even considering a takeover bid under the current share price, this is just the first of a number of manoeuvres aimed at bringing the Cadbury directors to the negotiating table. The possibility of beating off two potential bids, with a third bidder also rumoured, is less likely than the chance of beating off Kraft Foods by itself and if a further bidder were to enter the fray this could possibly mean curtains for Cadbury.

As a consequence, this renewed pressure on the Cadbury directors to negotiate with their potential bidders is likely to yield some give over the next few days. The company, if it assumes it is impossible to escape the clutches of a bidder, will then revert to a negotiating position to protect shareholders and employees and ensure they arrange the best deal for everybody.

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