Who Will Trump Kraft for Cadbury?

If you've been following Kraft's (NYSE:KFT) takeover proposal for leading confectionary company Cadbury (NYSE:CBY), you know that not much has yet happened beyond Cadbury's initial rejection. That raises a crucial question: Will another suitor emerge before Kraft can push a revised offer?

Not enough
Since making its rejection public, Cadbury has released the full text of Chairman Roger Carr's reply to Kraft CEO Irene Rosenfeld. There are plenty of juicy morsels in this missive, including this standout gem: "Under your proposal, Cadbury would be absorbed into Kraft's low growth, conglomerate business model, an unappealing prospect which contrasts sharply with our strategy to be a pure play confectionery company."

Carr proceeds to describe "uncertain value" in the cash-and-share offer, since Kraft stock has slumped since the announcement. The takeaway, as I see it, is that any potential suitor will not only have to offer a higher bid, but also be ready to pay up primarily in cash.

With that in mind, let's check out how some well-known packaged foods and consumer-staples companies compare to Kraft and Cadbury on key financial metrics.

Who wants candy?

Data from Yahoo! Finance and Capital IQ as of Sept. 14.

Clearly, not all of the above companies make sense as possible acquirers -- at least, not at first glance. Nestle is probably the most logical candidate, both in terms of financial heft and potential synergies. Like Cadbury, Nestle boasts a broad global reach, and Nestle's Smarties brand candies and KitKat, Butterfinger, and namesake chocolate products make a strong case for substantial operating and marketing synergies. Plus, Nestle has the financial heft to manage a deal.

Hershey, of course, is a fellow pure-play confectioner, but an unlikely bidder. On a market-cap basis, the company is dwarfed by Cadbury, and Hershey's woefully large 3.6 long-term debt-to-equity ratio almost certainly prohibits a debt offering of sufficient magnitude. Instead, market intelligence suggests that Cadbury could go after Hershey, creating a company large enough to escape Kraft's greedy grasp. From a financial perspective, that deal looks doable, but with only 14.4% of Hershey's 2008 sales coming from outside the U.S., operating synergies could be tough to come by.

Finally, what about Procter & Gamble? Yeah, yeah, it seems outlandish, but P&G was formerly in the food business, having sold off the Folgers, Jif, and Crisco brands to J.M. Smucker in prior years. Given P&G's recent challenges to keep up with consumer trends, I can see the fast-growing Cadbury looking mighty tasty, potential synergies or not. Moreover, Procter's announced a stronger push into emerging markets -- regions where Cadbury already enjoys an ample presence. In light of P&G's comparative size and its conservative debt position, buying Cadbury would be tantamount to scarfing down a gumdrop.

What will happen? When will it happen? And what sort of stock volatility might we see in the meantime? Who knows, Fools? I have a feeling there'll be time enough for plenty of chocolate bars while we wait.

Other foil-wrapped Foolishness:

• Kraft is lagging its packaged-foods peers ...
•  ... especially this caffeinated dynamo.
• Meanwhile, these companies are benefiting from organic growth.