By Jenny Wiggins, Lina Saigol and Kate Burgess

EVER SINCE Kraft went public with its £10.2bn ($17.1bn) unsolicited offer for Cadbury in early September, the market has been waiting for a counter-bid for the British confectionery company to emerge.

Yesterday, Hershey - the US’s largest chocolate maker - and Italian confectionery group Ferrero helped fuel those hopes. They released separate statements saying they were in the preliminary stages of evaluating their options regarding the owner of Flake chocolate bars and Trident chewing gum. Hershey, which hired JPMorgan in September to advise it, has made no secret of its desire to expand into international markets. It gets 14 percent of its $5.13bn in revenue outside its home market.

But launching a formal offer with a partner such as Ferrero would face many obstacles, including possibly the need to adjust Hershey’s complex shareholder structure. The company is controlled by an active charitable trust that owns about 31 percent of Hershey and 80 percent of its voting shares. In 2002, Hershey was forced to abandon a proposed sale of the company to Wrigley amid intense opposition to a deal in Hershey’s home state of Pennsylvania, and all seven of the trust board members who voted for the Wrigley deal were removed after it failed.

Analysts at JPMorgan said yesterday there were doubts over how much equity Hershey could raise from existing shareholders through a rights issue. Ferrero or Cadbury shareholders would be unlikely to take Hershey non-voting shares without the Trust subscribing to the rights issue and with Hershey still keeping its dual-class share structure, they said. In order to sell new stock, Hershey would have to move to a single-class share structure, but analysts said the Hershey Trust would be reluctant to do this because it would lose control of the company. Hershey has $119m in cash and debt of $1.7bn, and in the year to October 4 it generated $1bn of earnings. Analysts estimated the company could only add some $4bn in debt before losing its investment grade status, so it would need to raise another £4.7bn in equity to afford Cadbury, which has a market capitalisation of £10.8bn.

Meanwhile, Ferrero is privately held - making it difficult to raise money in the private equity markets. It has never had any large-scale merger and acquisition experience. Analysts are unclear about the exact value of Ferrero’s chocolate sales, but Ferrero’s confectionery sales were estimated at €6.2bn ($9.3bn) in 2008, with nearly half that coming from the European Union, according to analysts at Investec.

An acquisition of Cadbury by Hershey and Ferrero would also create fewer cost-cutting opportunities than an acquisition by Kraft.

Cadbury and Ferrero’s chocolate markets are complementary in Europe rather than overlapping, with Ferrero holding significant shares in Germany, France, Italy and Spain - countries where Cadbury is weak, according to JPMorgan. The bank estimates that the only meaningful overlap between Ferrero’s and Cadbury’s chocolate businesses would be in the UK, Poland, France and Russia.

Analysts at Credit Suisse said there was no obvious way for Ferrero and Hershey to split Cadbury’s assets. Hedge funds and institutional investors yesterday said they were sceptical that a firm counter-offer would emerge. One person at a US-based hedge fund that bought just less than 1 percent of Cadbury after Kraft announced its unsolicited offer said he believed the US food group would have made a higher formal offer if it expected Cadbury to receive a counter-bid.