Hershey Heats Up Chocolate War

The battle for British confectioner Cadbury plc (CBY) continues to top headlines. Late Friday, the Wall Street Journal reported that Hershey will next week likely muster a bid of at least 800 to 820 pence, or $17.9 billion, to compete with Kraft Foods' (KFT) hostile bid. “Boards of the two companies have held a flurry of talks in recent days. Cadbury board members have said they would not recommend a price of less than 850 pence to their shareholders,” the Journal, which cited anonymous sources, said. Hershey will need to show its hand with a fully financed bid by Jan. 23.

A couple of weeks ago, Kraft sweetened its bid by raising the cash portion by 60 pence, while keeping the overall value—760 pence per share, or $17.2 billion—the same. Analysts and investors maintain that Kraft will need to ramp up its bid to at least 800 pence. It has until Jan. 19 to do so. Cadbury shares are trading around 790 pence.

According to Reuters, Cadbury on Friday also received support from its second-largest shareholder, Legal & General Investment Management Ltd., which has a 5.1 percent stake. The news came as little surprise as the New Jersey-based firm also formally rejected Kraft’s hostile bid when it was made public in September. Bloomberg adds that activist investor William Ackman of Pershing Square Capital Management LP, bought a $950 million, or 2 percent, stake in Kraft, and, repeating Warren Buffett’s Jan. 5 warnings, has urged Kraft CEO Irene Rosenfeld to limit the amount of stock she uses on the bid. “The more Kraft stock they issue, the less interesting this deal is,” Ackman said in an interview. “Fortunately, the seller also prefers cash." According to the billionaire investor, Kraft’s stock is “extremely undervalued.” Ackman plans to purchase more of Kraft’s stock soon, he said.

Friday was a bad day for Johnson & Johnson (JNJ). The consumer products giant said it was voluntarily recalling more than 53 million bottles of Tylenol, Motrin, Benadryl, Rolaids, and St. Joseph's Aspirin after consumers reported "an unusual moldy, musty, or mildew-like odor that, in a small number of cases, was associated with temporary and non-serious gastrointestinal events," including nausea, stomach pain, vomiting, and diarrhea.

According to Reuters, the recall “drew a sharp rebuke from U.S. regulators.” The FDA said the company's response was slow and it sent a warning to J&J's McNeil Consumer Healthcare unit. The latest recall comes after J&J reported to the FDA in 2009 that it had received about 70 complaints an intestinal problem or an unusual smell with Tylenol caplets a year prior. The recalls are mainly in the Americas, the United Arab Emirates, and Fiji.

In other J&J news, the Justice Department on Friday charged the company with paying tens of millions of dollars in illegal kickbacks to Omnicare, Inc. (OCR), a nursing-home pharmacy company. The kickbacks were made to boost sales of antipsychotic Risperdal, among others, to nursing-home patients, the New York Times and WSJ report. The latter characterizes the charges as the "latest case in the government's campaign against abusive drug-marketing practices."