Shares in food company Nestlé and British confectioner Cadbury Schweppes dipped today on the prospect of a joint bid for US rival Hershey.
Shortly before midday, Nestlé shares were down 2.17 per cent at 315 Swiss francs, and Cadbury shares were down 1.38 per cent at 462-1/4 pence sterling after slipping as low as 450-3/4p earlier.
Dealers in London and Zurich said today's fall was on renewed fears the two companies would overpay for Hershey. "In the current environment the first reaction to anything like this is negative," one London-based dealer said of Cadbury's fall.
Sources say Nestlé and Cadbury are planning a deal that would envisage Nestlé buying Hershey and then passing on some brands to Cadbury, and Cadbury getting some of Hershey's distribution assets.
Cadbury is thought to be ready to commit up to £3 billion sterling in a joint bid.
Analysts had mixed views on the prospect of a joint deal, especially as legal hitches at Hershey could derail the sale and as the extent of Cadbury's involvement was unclear.
Analysts said Cadbury will want to safeguard its brands, which are produced under licence by Hershey, but it may struggle to buy enough of Hershey's business or get a distribution channel to get benefits of critical mass.