By Jessica Hall and Victoria Howley
PHILADELPHIA/LONDON (Reuters) - Cadbury Plc
Italian chocolate maker Ferrero and U.S.-based Hershey said on Wednesday they were reviewing a possible offer for Cadbury, which is the target of a hostile 9.9 billion pound bid by U.S. food group Kraft Foods Inc
Both Ferrero and Hershey have interest in Cadbury's chocolate business, but all options are under consideration, said the source, who declined to be identified by name because he was not authorized to speak with the media.
Although Cadbury's chocolate business is the main draw, under one scenario Ferrero could take Cadbury's gum and candy division, a unit worth about 5 billion euros (4.5 billion pounds), the source said.
Cadbury shareholders may not balk at the company being broken apart if Ferrero and Hershey offered an all-cash proposal that marked a substantial premium to Kraft's cash-and-stock bid, a second source familiar with the situation told Reuters.
Since Cadbury is already subject to a hostile bid, the decision-making control is in the hands of its shareholders. From a shareholder perspective, a richer, all-cash offer may be tempting, that source said.
Ferrero and Hershey have ample time to decide how and whether to proceed with a Cadbury offer since the final decision on Kraft is not slated to come until early February. One source described the process as "very preliminary" between the two firms.
The Ferrero-Hershey talks are complicated by each company's unique ownership structure.
Italian newspaper Il Sole said the family that controls the Italian firm has historically shown little interest in sharing management. Meanwhile, Hershey is controlled by a charitable trust.
Cadbury shares closed Friday in London up 1.2 percent at 800.5 pence.
FERRERO PREFERS A FRIENDLY OPTION
Il Sole also said on Friday that U.S. private equity firm Kohlberg Kravis Roberts & Co
However, a source familiar with the situation said that KKR is not involved with Hershey or Cadbury.
KKR declined comment.
Traditionally conservative Ferrero would aim to make a friendly bid for Cadbury if it did get involved, an Italian source close to the matter told Reuters on Thursday.
A friendly offer would also give Ferrero access to Cadbury's books so it could do due diligence, something its financing banks may demand because the company is not active in the gum and candy market, one London trader said.
A Ferrero spokesman declined to comment.
The Ferrero family should meet advisers Mediobanca
Italy's two biggest banks, Intesa Sanpaolo SpA
(Additional reporting by Ian Simpson in Milan and Megan Davies in New York; Editing by Michele Gershberg and Tim Dobbyn)
($1 = 0.6722 euro = 0.6002 pound)
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