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James Brockett

James Brockett

29 Jan 2010 | 16:09

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Welcome to my new blog , in which I will take a look at the business and HR facts and figures behind the FTSE -100 companies making the news.


Cadbury is in the process of being taken over by US cheese maker and all-round food giant Kraft. For anyone who has missed the details (or has switched off during the interminable negotiations and games of bluff that have taken place in the last few months), the Cadbury board has finally accepted a bid for the firm valued at around £11.5 billion. This means that shareholders have until 2 February to decide whether or not to accept the deal.

Notwithstanding the complaints of Warren Buffett, one of Cadbury’s largest shareholders – owning 9 per cent of Cadbury shares – the deal is almost certain to go ahead. Around 40 per cent of Cadbury’s shares are owned by US investors who aren’t likely to be swayed much by the “great British brand” argument, while another 20 per cent are owned by hedge funds that are only there at all because they hope to profit from the takeover. In fact, few shareholders of any kind will turn down the chance of a short-term profit – as the Cadbury board well knows, which is why it has finally seen the writing on the wall and accepted the offer (but not before a desperate search for another buyer to save Cadbury from Kraft’s clutches).

The big HR story in all this is the fate of Cadbury’s 4,500 UK-based staff, especially those at the firm’s historic site of Bournville in Birmingham. The union Unite certainly fears the worst, and some of these fears might be justified: Kraft has financed the takeover with borrowings of around £7 billion, a debt that will fall on the new firm and is bound to affect its financial priorities. There are some parallels with the Glazer family’s takeover of Manchester United FC – except that while the Glazers could make some of their money back by selling Cristiano Ronaldo, Kraft is more likely to seek a return on its investment by making “synergies” that include cutting front-line jobs.

But perhaps some of the pessimism has been overdone. Far from being a quaint British institution that is about to be swept away by a new tide of American efficiency, Cadbury is itself very international in outlook - it employs 46,000 people in 60 countries – and also very profitable (its last full year results showed a turnover of £5.4 billion and an operating profit of £638 million). Despite the philanthropic roots of Cadbury’s 19th century founders, the company has not up until now been run as a charity. If it was desperately uneconomic to continue making chocolate bars on these shores, then sentiment alone would not have been enough to preserve jobs this long. Instead, Cadbury is actually a British success story, and Kraft, while it clearly believes itcan enhance its profitability further, would be foolish to move in and destroy the foundations of that success. And before too many political points are made about foreign predators swooping on UK firms, it should be remembered that Cadbury has made its fair share of acquisitions over the years, including some American ones such as the Adams chewing gum firm it bought for $4.2 billion (£2.6 billion) in 2003. If a business is worth its salt, it is worth keeping - whatever the nationality of the owners.

An interesting footnote to the saga is that Cadbury’s chairman Roger Carr has called on the government to review its list of firms that enjoy state protection from overseas bids. Currently, only Royal Mail, BAE Systems and Rolls Royce enjoy this status. It would be stretching it to argue that chocolate-making is an issue of national security, but there are rumours that UK energy firms such as National Grid and Centrica are on the shopping list of Russian giant Gazprom. That would certainly raise some political hackles. Watch this space.
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About the editors

James Brockett

James Brockett

News editor at People Management

Jill Evans

Jill Evans

Legal editor on People Management

Rob MacLachlan

Rob MacLachlan

Editor of People Management

Tim Smedley

Tim Smedley

Features writer on People Management.

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