Word: stitzer
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...announced, values Cadbury at about 11 times 2009 EBITDA, estimates Growe. This is far below the 19 multiple that Mars paid when it snapped up Wrigley in a $23 billion deal last year. And Cadbury's growth potential, as outlined by the company's CEO Todd Stitzer last year, is bigger than Wrigley's was at the time. Analysts believe a suitor would need to pay at least a 16 multiple, or about $21 billion, to seal a deal with Cadbury...
Logically, it made Cadbury and Hershey potential merger partners. Indeed, Cadbury has had on-and-off merger talks with Hershey for more than a decade and even teamed with Nestlé in a failed $10.5 billion bid for Hershey in 2002. The latest talks occurred in 2007 between Stitzer and then Hershey CEO Richard Lenny. But Lenny was ousted from Hershey in an ugly shake-up later in the year. Hershey continues to stumble--most recently when it raised prices 10% in response to rising costs, a move that hit its stock hard...
...Stitzer has also engineered a series of restructurings. Beginning in 2003, he sold off low-margin businesses, closed about a quarter of the company's factories and cut 10% of its workforce. But a series of missteps hindered the company's turnaround. Although Stitzer had projected annual margin growth of 50 to 75 basis points for four consecutive years, it came in at less than half that...
...Stitzer says he's under no pressure to do a deal. When Nestlé acquired Rowntree in 1988, there were similar predictions of industry consolidation that never materialized, he says. "I don't think I'd be a proponent of the domino theory of consolidation." He insists he's committed to achieving revenue and margin growth targets to restore investor confidence and sees Cadbury as more of an acquirer than an acquiree. "We're always looking for the right bolt-on acquisition," he says...
Cadbury's operating margins expanded 190 basis points in the first half of 2008, and Stitzer expects this to continue despite the economic downturn. "We don't sell automobiles," he says. "We sell small moments of pleasure--small treats that are affordable in most circumstances." The question is, Can Cadbury sell enough of them...