Kraft Foods Inc. questioned the robust growth targets of Cadbury PLC as it stuck by its 9.8 billion pound ($16.3 billion) hostile takeover for the British chocolate company on Tuesday.
Kraft suggested it has no plans to raise the price of its cash and shares offer, despite a recent surge in Cadbury's share price that leaves the U.S. company's offer well below current trading levels.
Responding to Monday's launch of formal defense documents by Cadbury, which seized the moment to play up its position as a strong independent company by raising its long term performance targets, Kraft said it intended to maintain a "disciplined approach."
"We have heard nothing from Cadbury that surprises us," Kraft Chairman and Chief Executive Officer Irene Rosenfeld said in a statement. "Cadbury's defense document only reinforces our belief that there is a compelling strategic and financial rationale to combining these two companies and that doing so would be in the best interest of both companies' shareholders."
Kraft, based in Northfield, Illinois, said that Cadbury shareholders should consider how the company plans to meet raised profitability forecasts without more spending on restructuring and how sales can accelerate amid low food price inflation.
Cadbury, which also confirmed that it had received rival approaches from The Hershey Co. and Italy's Ferrero International SA, lifted organic revenue growth to 5-7 percent per year, up from a previously forecast 4-6 percent, and forecast improved margins of 16-18 percent by 2013, up from the "mid-teens."
The company also held out a carrot to investors of double digit growth in dividends per share from 2010 onwards.
But some analysts have suggested those projections, at the top of the forecasts for the confectionary market, could be tough for Cadbury to achieve alone and Cadbury Chairman Roger Carr did leave the door open for some kind of tie-up.
The company's board is open to discussion with any potential suitor _ Kraft included _ that made a compelling offer, Carr said on Monday. But he added that no such offer was yet on the table and Kraft's offer was a "long, long, long way off."
As well as Hershey and Ferrero, analysts have suggested that Nestle SA may be interested, although the Swiss company has made no comment.
Kraft has said it wants to get majority shareholder votes for its offer _ which includes 300 pence in cash and 0.2589 new Kraft shares for each Cadbury share _ by Jan. 5. But it can extend that deadline to Feb. 2 under British takeover laws, and has until Jan. 19 to raise its bid.
Kraft's existing offer is currently worth 729 pence a share after a surge in Cadbury's share price thanks to speculation of a bidding war.
The stock was trading at 791 pence on Tuesday morning, down 0.5 percent.
Charles Stanley analyst Jeremy Batstone-Carr said market reaction to Kraft's response was muted because it essentially altered little in the takeover battle.
"Whilst Kraft may question the credibility of Cadbury's defence strategy, investors could raise the same concerns regarding Kraft's recent sub-sector operating performance and its international expansion-integration plans," he said.
Batstone-Carr recommended that investors reduce Cadbury shareholdings because Kraft may struggle to justify an offer price around the 850 pence many analysts believe is necessary to start serious talks.
"In the absence of a rival offer, which we continue to regard as financially stretching for all mooted participants ... we believe that the prevailing balance of probability strongly favours Cadbury's continued independence," he said.