Cadbury surrenders to Kraft takeover, as PM Brown fires warning over job cuts
British Prime Minister Gordon Brown yesterday fired a warning shot at American food conglomerate Kraft Foods, outlining his determination to secure jobs at Cadbury, the 186-year old maker of Dairy Milk chocolate, which has agreed to be taken over by the American company for GBP 11.9 billion.
The Prime Minster spoke shortly after the board of Cadbury, which employs 45,000 staff including 9,000 in the UK, announced that it would recommend an 850p a share offer from Kraft, ending one of the City’s most fiercely contested bid battles.
The trade union Unite has warned that Kraft plans at least 10,000 job cuts worldwide to slash costs and repay the cash it will need to borrow for the deal.
Prime Minister Brown said yesterday: “The one thing I want to say is this: we are determined that the levels of investment that take place in Cadburys in the United Kingdom are maintained.
“And we are determined of course, that at a time when people are worried about their jobs, that jobs in Cadbury can be secure,” he added.
Kraft rushed to reassure Cadbury’s staff about the takeover.
Irene Rosenfeld, chairman and chief executive of Kraft, said: “We have great respect for Cadbury’s brands, heritage and people. We believe they will thrive as part of Kraft Foods.”
Roger Carr, chairman of Cadbury, added: “We believe the offer represents good value for Cadbury shareholders and are pleased with the commitment that Kraft Foods has made to our heritage, values and people throughout the world.”
Shares in Cadbury soared by over 3 per cent yesterday after British confectioner confirmed it was finalising a deal to be taken over by Kraft Foods, the American food conglomerate.
In a terse joint statement, Cadbury and Kraft said: “The boards of Kraft Foods and Cadbury confirm that they are finalising the terms of a recommended offer for Cadbury. A further announcement will be made shortly.”
Cadbury’s decision is believed to have matured after Kraft raised its offer from GBP 10.5 billion to about GBP 11.7 billion, or roughly 761p per Cadbury share to 840p a share, plus a 10p a share dividend to Cadbury shareholders. Shares in Cadbury opened up 26p at 832.5p yesterday morning.
The deal ends a proud history for Cadbury as an independent company. The chocolate maker, famous for brands such as Dairy Milk and Wispa, dates back to 1824 when John Cadbury, a Birmingham Quaker, began selling cocoa-based drinks in his tea and coffee emporium.
The takeover — which the British Secretary Lord Mandelson, had strongly opposed — is likely to be seen as something of a landmark in the British corporate sector.
Lord Mandelson, who was unable to intervene in the bid process, nonetheless warned Kraft last month: “If you think that you can come here and make a fast buck you will find that you face huge opposition from the local population . . . and from the British Government.”
It will also raise fears of job losses at Cadbury, which employs 45,000 people worldwide, including more than 9,000 in Britain. The trade union Unite has warned that Kraft plans at least 10,000 job cuts worldwide to slash costs and repay the cash it will need to borrow for the deal.
Kraft bought Terry’s, another iconic British chocolate company, in 1993 and closed its York factory two years later.
The takeover bid has created a huge outpouring of resentment against foreign takeovers of British companies, particularly in Cadbury’s Birmingham birthplace. In the past four years, more than £292 billion has been spent by foreign companies buying British rivals.
During the past decade, household names such as P&O, O2, Abbey, BAA, Jaguar Land Rover, the glass manufacturer Pilkington and the steelmaker Corus have all succumbed to foreign takeovers, along with a clutch of electricity and water companies. But few have aroused as strong feelings or emotions as the Cadbury bid.
Kraft owns confectionery brands such as Milka and Toblerone but suffers from a poor reputation among many in the food industry because it makes most of its money from processed cheese and meat. It originally tabled a GBP 10.9 billion bid for Cadbury in September last year. The bid went hostile in November as Kraft made its proposals direct to Cadbury’s shareholders over the heads of its board.
However, Cadbury and its shareholders strongly resisted, obliging Kraft to raise its terms.
It is thought it has been able to fund its raised bid by selling its north American frozen pizza business last month to Nestle.
Cadbury’s decision to recommend the takeover does not mean that Kraft is certain of victory. Hershey, the American confectioner, has until the weekend to table an offer. But few believe that Hershey can outgun Kraft, which is five times its size.
Cadbury is the world’s second-largest confectioner after Mars-Wrigley
It operates in more than 60 countries. The company made profits of GBP 638 million in 2008.
