Hershey Says It Won't Make Counterbid For Cadbury

Hershey Co. (HSY) said it won't make a counter bid for Cadbury PLC (CBY), an announcement that takes Kraft Foods Inc. (KFT) a step closer to completing its acquisition of the U.K. confectioner.

Hershey's statement wasn't unexpected as the company wouldn't have had the financial firepower to top Kraft's offer. Hershey said in a statement Friday that it reserved the right to make an offer again if Kraft is unable to complete the deal or if there is a material change of circumstances. Kraft's sweetened offer this week has the backing of Cadbury's board, and Kraft has said it believes it will be able to close the deal.

This may leave Hershey with few avenues for international growth. Hershey and Cadbury were seen as potential partners for years, but Hershey's relatively smaller size and the charitable trust that controls it made it difficult for the company to enter a deal. Hershey--which currently gets the bulk of its sales from the slow-growth U.S. market--faces fewer tasty treats to make a concerted push overseas.

One option is buying or linking up with smaller confectionery companies--none of which would have the scale of Cadbury. At the same time, it faces large competitors. Mars Inc. in 2008 created its own candy conglomerate by acquiring Wm. Wrigley Jr. Co. Mars sells brands like M&Ms and Dove chocolate, and its stable of products includes such names as Wrigley's Spearmint gum.

Earlier this week Cadbury accepted a GBP11.9 billion ($19.4 billion) offer from Kraft, a deal that ends a four-month acrimonious battle and nearly 200 years of independence for the U.K.'s largest confectionery company. Kraft, which makes Toblerone and Milka chocolate as well as processed cheese and ready meals, said it has agreed to pay 840 pence a share for the company as well as a 10-pence dividend.

-By Anjali Cordeiro, Dow Jones Newswires; 212-416-2200; anjali.cordeiro@dowjones.com

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