…that’s what deals are made of?

Irene Rosenfeld, the CEO of Kraft, has been extremely adamant over the last few days that she wants Kraft to acquire Cadbury. In that respect, she’s kind of like me when I try to buy a candy bar and it gets stuck in the office vending machine and I am about ready to try everything but a baseball bat to get it out, so I respect that.

Meanwhile, Cadbury has told her to go suck a creme egg, and that her bid is too low. This has opened up a couple of avenues. First, somebody suddenly woke up and realized that the margins on candy are pretty good and there aren’t many confectioners left, so Hershey (which already owns rights to a substantial part of Cadbury’s US business) might make a bid. Traders are speculating, though the hoops Hershey would have to jump through are substantial:

Options strategists joined the fray, questioning whether Hershey would submit a competing bid to buy Cadbury itself or whether Cadbury or Kraft would set their sights on Hershey — a somewhat difficult task since Hershey is controlled by a trust that has been reluctant to cede ownership.

We at LOLFed welcome a bid from Hershey, for a couple of reasons. They’re being advised by JPM, so we can break out that picture Jason took last time he was in NYC of Jamie Dimon getting out of his town car with a bag full of bacon bars from Vosges.  And, also, it would yield infinite “Merging On The Hershey Highway” jokes, and you know I will go there.

The other possibility, though, is that Kraft can alway borrow more money to make it happen, but at substantial cost to their credit rating:

Kraft may have to sweeten its offer to woo Cadbury after the confectioner rejected the initial bid as too low, said Brian Weddington, a senior analyst at Moody’s Investors Service. A higher bid may put pressure on its long-term credit rating of Baa2, two levels above junk. Kraft has about $19 billion of bonds outstanding.

Kraft is working with credit companies to maintain investment-grade ratings, chief executive officer Irene Rosenfeld said yesterday on a conference call. Kraft has about $1.25 billion of bonds maturing by August 2010.

Moody’s said if it did lower Kraft’s Baa2 long-term credit rating, the downgrade would probably be by one level. That would keep the company’s debt at investment grade. Standard & Poor’s also said it may reduce Kraft’s long-term credit and senior unsecured debt ratings.

This is probably not that big a deal, because if they are talking to Citi they can always put up Easy Cheese as collateral. We hear the Bandit is a fan. Actually, we’re kidding about that too, because as soon as this bid was announced the spreads widened on Kraft’s debt, so it could be a big deal, and it means you might not see Kraft willing to cough up that much more cash for this acquisition. Oh well. I was looking foward to chocolate-covered macaroni and cheese, kind of…