Kraft not expected to waiver much in bidding war; Analyst: Greywolf unlikely to stop iPCS sale

By Cristal Cody

Tupelo, Miss., Nov. 18 - The chances of a rival bidder to Kraft Foods Inc.'s hostile offer for Cadbury plc woke investors on Wednesday.

Chocolate makers Hershey Co. and Ferrero International SA said they are considering a potential bid for the British candy maker.

Kraft may raise its offer conservatively, but the U.S. food manufacturer won't be bullied into a hefty increase from a bidding war, an analyst told Prospect News.

Also on Wednesday, iPCS, Inc. said it had reached an agreement to settle shareholder lawsuits over the company's buyout by Sprint Nextel Corp.

Shareholder Greywolf Capital Management LP opposes the deal, but no other rumblings have been heard, an analyst told Prospect News.

Meanwhile on Wall Street, investors reversed course and sent stocks down on Wednesday in response to housing data.

"The unexpected decline in mortgage applications and less housing starts weakened the broader market," Bill O'Grady, chief market strategist with Confluence Investment Management LLC, said Wednesday.

The Dow Jones Industrial Average slipped 11.11 points, or 0.11%, to close at 10,426.31.

The Standard & Poor's 500 index fell 0.52 of a point, or 0.05%, to 1,109.80, and the Nasdaq Composite index lost 10.64 points, or 0.48%, to 2,193.14.

Potential Kraft rivals emerge

Hershey, Pa.-based Hershey, which is controlled by the charitable Hershey Trust, confirmed in its statement to the London Stock Exchange on Wednesday that it is "reviewing its options" on a bid for Cadbury.

Privately held Ferrero, the Italy-based maker of Nutella chocolate hazelnut spread and Tic Tac mints, said in its statement moments later that the company is "in the preliminary stages of evaluating its options in respect of Cadbury."

Cadbury has rejected Kraft's bid of 300p in cash and 0.2589 of a share of Kraft per Cadbury share, which values Cadbury at 725p a share.

Kraft's offer is valued at more than $16 billion.

The European Commission has scheduled a Dec. 14 provisional deadline to review Northfield, Ill.-based Kraft's hostile bid.

Erin Smith, an analyst with Argus Research Co., told Prospect News on Wednesday that Kraft is expected to stay conservative in any bid negotiations for Cadbury.

"They don't want to overpay for this," she said. "But I think they're also very interested in Cadbury and see it as a big positive for their strategy for long term, so I wouldn't be surprised if they raised it a little bit. But I don't expect them to go to a much higher price."

Cadbury's U.K.-listed shares closed up 9.5p, or 1.21%, at 797.5p.

Kraft shares slid 38 cents, or 1.37%, to $27.26.

Hershey shares fell 78 cents, or 2.03%, to $37.63.

Lone shareholder opposes iPCS deal

Shareholders and iPCS said Wednesday they reached an agreement to settle the cases in the Circuit Court of Cook County, Illinois, on the condition that the wireless network service provider provide additional information about its $831 million takeover by Sprint Nextel.

On Tuesday, Greywolf, which owns 8.2% of iPCS' outstanding shares, reiterated objections to the deal in a letter to iPCS' board.

Greywolf said it does not plan to tender its shares at a "bargain price" of $24.00 a share in cash in Sprint Nextel's tender offer, which expires on Nov. 25.

"I don't think they alone can force a higher price," Leah S. Pilla, an analyst with CFA Knight Libertas LLC, said in an interview on Wednesday.

The iPCS board has approved the deal, which includes the assumption of $405 million of net debt.

"I haven't heard of anybody else that is opposed to the offer price," Pilla said. "It's a fair price. They certainly hold a big stake, but I don't know if it's enough to force Sprint to pay more - if they're the only ones out there fighting for it."

The acquisition is expected to close by early next year.

Schaumburg, Ill.-based iPCS sells products and services under Overland Park, Kan.-based Sprint Nextel's brand name and in Sprint stores in 81 markets.

Shares of iPCS shed 2 cents, or 0.08%, to close at $23.95.

Sprint Nextel's stock jumped 25 cents, or 6.76%, to $3.95 on Wednesday.

Mentioned in this article:

Cadbury plc London: CBRY

iPCS, Inc. Nasdaq: IPCS

Hershey Co. NYSE: HSY

Kraft Foods Inc. NYSE: KFT

Sprint Nextel Corp. NYSE: S

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