London, Jan 14 (PTI) US confectioner Hershey Co is preparing a bid for British chocolate maker Cadbury, that will counter US-based Kraft Foods' 10.4-billion-pound hostile offer, media reports says.
Quoting people familiar with the matter, the Financial Times said that "the charitable trust that controls Hershey is preparing a counter-bid to Kraft's hostile 10.4 billion pound offer for Cadbury."
A formal offer to this effect could be made within two weeks, the daily said citing sources.
A Hershey bid would be welcomed by Cadbury, which is resisting Kraft's approach.
"Although Cadbury has not solicited a 'white knight' bid from Hershey publicly, the confectioner has made clear that it would prefer Hershey to Kraft," FT said.
The charitable trust owns a third of Hershey's stock but controls 80 per cent of its shareholder votes.
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Meanwhile, Cadbury Chairman Roger Carr has told the newspaper that "Hershey, which owns the rights to the Cadbury brand in the US, is 'more appealing' from a cultural view.
As per a plan under discussion, Hershey Foods will authorise a former Goldman Sachs investment banker, Byron Trott, to attract private equity investors into the deal.
The use of debt, could threaten Hershey Trust's investment-grade credit status, but sources told FT that the bid being prepared "will probably be investment-grade and do'able".
Besides, Hershey Trust is also preparing to make an equity investment of $1.25 billion.
"The equity investments would reduce the amount of debt to be raised," the daily said, adding that "the debt would be raised by JPMorgan Chase and Bank of America Merrill Lynch."
Cadbury is resisting hostile takeover offers from Kraft. The American firm's original offer for Cadbury was 300 pence and 0.26 Kraft shares for every Cadbury stock, The offer was rejected by Cadbury.
Last week, Kraft said it would raise the cash component of the bid by 60 pence.
Cadbury again rebuffed Kraft Food's "derisory" takeover offer, citing "outstanding" financial performance in 2009 and reiterated that shareholder value will be maximised if it remains an independent entity.
Irene Rosenfeld, Kraft's Chief Executive, has met some of Cadbury's top UK institutional investors in London on January 13 in an effort to win their support. Cadbury shareholders must vote on Kraft's offer by February 2.
Meanwhile, the family that owns Ferrero, the Italian maker of Rocher chocolates is not in the race to buy Cadbury.