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Cadbury CEO Stitzer shifts over to defense
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10:34, September 15, 2009

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Todd Stitzer engineered more than 40 transactions after joining Cadbury Plc as a Harvard- and Columbia-trained mergers and acquisitions lawyer. Now as chief executive officer, he's testing his skills playing defense.

Stitzer, fighting a $16 billion unsolicited bid from Kraft Foods Inc, is seeking to prove to shareholders Cadbury can do better alone. Both Stitzer and Kraft CEO Irene Rosenfeld are set to make speeches this week after Cadbury, the maker of Trident gum and Dairy Milk chocolate, rejected Rosenfeld's proposal as an "unappealing prospect" from a "low-growth conglomerate".

His desire to stay independent is undermined by investors such as Mario Gabelli from Gamco Asset Management Inc, who said he wants Kraft to pay more. Cadbury's shares are trading above Kraft's bid price on speculation a higher offer will emerge.

"Todd does not want to be the CEO under which Cadbury was sold," said Ken Hanna, who was Stitzer's finance chief for five years before stepping down in March. "He will defend this until it becomes indefensible, until there is a knock-out price."

Cadbury shares closed at 755.5 pence last week, while Kraft's cash-and-stock offer is currently worth 705.7 pence per share. Analysts from Evolution Securities, Investec and Panmure Gordon have said Kraft's interest may draw rival bids from PepsiCo Inc or a combined Nestle SA-Hershey Co approach, upping the pressure on Stitzer.

Outbidding Nestle

Stitzer is expected to give more details of his takeover defense when he addresses investors at a Sanford C. Bernstein analyst conference in London tomorrow.

"He's not done yet," said Chris Patten, a Cadbury director since 2005 and chancellor of Oxford University. "He absolutely has the backing of the board."

Patten declined to comment specifically on Kraft's approach, while London-based Cadbury declined requests to interview Stitzer or Chairman Roger Carr.

Kraft's Rosenfeld may shed more light on her plans to engage Stitzer when she speaks at the University of Toronto's Rotman School of Management.

It wasn't long ago that the Pennsylvania-raised, 57-year- old Stitzer was the predator in a takeover battle, outbidding Nestle SA for chewing-gum maker Adams Inc in 2003 to make Cadbury the world's biggest confectioner. Cadbury held that rank until it was displaced by Mars Inc's $22.6 billion purchase of Wm Wrigley Jr Cos last year.

The $4.2 billion Adams purchase, which Patten says made Cadbury a "true global company", ensured Stitzer's promotion to CEO in 2003.

Though Cadbury shares jumped 60 percent in Stitzer's first three years, they stagnated in 2006 after a UK salmonella scare and a Nigerian accounting scandal that led to an investor lawsuit. Cadbury also scrapped its profitability target in 2006.

In 2007, billionaire investor Nelson Peltz demanded the breakup of the company, and the US drinks arm was later spun off into what is now Dr Pepper Snapple Group Inc after the credit crunch derailed the sale of the division.

Cadbury would have been "bid-proof" if Stitzer had kept Dr Pepper, according to Graham Jones, an analyst at Panmure Gordon in London. "If Todd had really wanted to resist, he could have. Instead, he effectively put Cadbury into play."

To rekindle investors' enthusiasm, Stitzer focused Cadbury's growth on emerging markets including India, Brazil and Mexico. Kraft cited that prowess in emerging markets as one of the rationales for its bid.

The first non-Briton to run a 185-year-old company founded by social reformist Quakers, Stitzer also fired more than 10 percent of the workforce and plans to close another 15 percent of Cadbury factories. The CEO also sold food labels from Smash mashed potatoes to Cadbury Schweppes jams, focusing on core brands such as Dairy Milk and Trident.

Source:China Daily



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