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Will Hershey's bid for Cadbury melt away?

There is new speculation regarding a potential offer for Cadbury by Hershey this morning with concerns that a potential offer may be starting to melt away. A review of the recent history of Hershey, which is controlled by a charitable trust, shows that the trustees of the charitable trust voted against a deal to sell the company to Wrigley back in 2002 for $89 a share. The current share price is $36 a share.

There are some in the market who believe that the company, with a market cap of just over $8 billion, is moving into very high-risk territory with a potential $17 billion offer for Cadbury. This would be a massive risk for a company which was one minute considering a sale to Wrigley and is now considering a massive expansion of the operation. While there is no doubt the company could benefit from the acquisition of Cadbury, by simply diversifying operations and cost savings, it would in affect treble the size of the company overnight, a situation which would bring its own unique problems and opportunities.

The truth is that the only firm offer on the table is from Kraft Foods, even if it is well below the current share price, and until we start to see more "greenbacks" hit the table there is very little to consider at this moment in time.

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