Cadbury Kraft takeover: More than meets the eye

January 20, 2010

Global Issue analysed by Susan Moger and Tudor Rickards


Updated: The integration of Cadbury into the Kraft Empire continues. Vince Cable, the highly respected financial figure imported from the Liberal Democrats, had made this one of his first interventions since the election to the Coalition Government, calling for a review of takeover practices.

Irene Rosenfeld made her first visit to her newly-acquired asset in October 2010.

The visit of Kraft CEO to Cadbury’s main Bournville cite in Birmingham, England continued the integration of Cadbury into the Kraft empire. The chief executive of Kraft Foods has not ruled out further Cadbury plant closures beyond the two years the firm is already committed to. Irene Rosenfeld said she was unable to offer further commitments after a visit to Birmingham’s Bournville factory. But she said it would remain “the heart and soul” of its chocolate business. Ms Rosenfeld had recently come second in Forbes magazine’s annual rankings of the world’s most powerful women, beaten only by US first lady Michelle Obama.

Asked what she was expecting with the merging of the companies, a net loss or gain in jobs, Ms Rosenfeld said: “I think it’s hard to say. It will vary area to area… We certainly understand that Bournville will remain at the heart and soul of our chocolate business and we are delighted about that. I think the key for us, though, this is a global business. We need to ensure that we are competitive on a global basis. As we bring together the combined company and we can share best practices we have the opportunity then to take the business to a new place.”

When it was suggested she was not able to make more of a commitment than at least two years, she said: “That’s correct.”

According to the Telegraph at the time of the takeover ,

The issues the review will look at include the “50pc plus one” minimum voting requirement for takeovers to go ahead; whether voting rights should be withheld from shares bought during an offer period; whether the 1pc disclosure threshold for dealings and positions in target companies should be reduced; and whether inducement fees and other deal protection arrangements should be restricted.

The review was launched by Business Secretary Vince Cable who said: “We welcome foreign investors but we want all shareholders to be empowered.” Last week [May 2010] the Panel took the rare step of publicly criticising Kraft over its acquisition of Cadbury. Its objections focused on assurances from Kraft that it would reverse Cadbury’s planned closure of its Somerdale factory. A week after winning the battle to buy Cadbury, Kraft reversed its position on Somerdale. The Takeover Panel concluded the US company should never have made its assurances on the Somerdale plant. It also criticised Lazard, Kraft’s adviser on the deal, saying the investment bank had “failed to discharge fully its responsibilities”. The Takeover Panel said it would take comments on the review of the code up to July 27.

An ealier post noted:

So the mighty Kraft finally hunted down its prey and swallowed up poor little Cadburys. Howls of protest from the UK. Nostalgia and affection for the taste of Diary Milk swept the land. One caller to a (BBC Five Live) phone-in said Cadburys was her favourite chocolate but that she would never buy any again.

In the wake of the takeover, LWD sought out an expert on Corporate Reputation for his views. Professor Gary Davies of Manchester Business School came up with several points that had been overlooked by other commentators in assessing the likely winners and losers of the takeover. He also added a more surprising comment based on his research into Corporate Reputation …

Students of Leadership

There are lessons to be learned from the Cadburys Kraft story from several perspectives. With the benefits of hindsight we might wish to consider what might have been done differently by the main parties involved. For the politically-minded, what ideas might be worth submitting to the Takeover Panel? How well do you think Irene and Vince Cable are operating?


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