As the Cadbury Turns: Hershey Seeks AG’s Blessing, Still Negotiating With Italy’s Ferrero

In the ongoing saga of Hershey (HSY) and Kraft Foods’s (KFT) potential $17 billion bidding war for Cadbury PLC (CBY), the rumors continue to swirl at a frantic pace.

Monday brought news Kraft might increase its $16.7 billion bid for Cadbury, amidst rumors Nestle (NSRGY) may join the bidding. That followed reports Friday that Hershey might issue $2 billion of new stock order to bid without the assistance of Italian confectioner Ferrero SPA.

The New York Post yesterday reported Cadbury’s secret weapon to resist Kraft is to turn around and try and buy Kraft’s own candy unit, which one banker calls the “Pac Man” defense;

The Post returns again today with a story saying Hershey is still trying to work out a way to split Cadbury ownership with Ferrero, with Ferroro eyeing the chewing gum operations of Cadbury, according to the Post’s “people close to the situation.”

Meantime, The Wall Street Journal yesterday reported that Kraft has gotten banks its working with on a deal, as many as 18 in all, including Lazard and Citigroup, Deutsche Bank (DB), HSBC Holdings PLC (HSBC), Barclay’s, Credit Suisse (CS), SocGen, and others, to agree to work only with Kraft. That would leave Hershey and any other suitor with fewer partners with whom to engineer a deal.

The Journal follows this morning with a report that the Hershey Trust is seeking the approval of the Pennsylvania attorney general for its bid, citing “people familiar.” The issue is that PA’s AG has authority to block deals that could threaten the Trust’s control of Hershey. Some have wondered how $8 billion Hershey can possibly pull off such a big deal with only $8 billion in market cap without seriously diluting the Trust’s controlling stake in the company.

Stay tuned!