Mergers, acquisitions and takeovers: the takeover of Cadbury by Kraft - Business, Innovation and Skills Committee Contents

1  Introduction

1. Normally, our programme of work is focused on scrutinising Government policy. Occasionally we need to widen that focus in order to respond to unforeseen events. The takeover of Cadbury by Kraft, and the manner in which it was conducted, provoked a strong public reaction and has proved to be an event which is likely to shape public policy in the future. We therefore believed that it was important for us to consider the matter. The purpose of this Report is to present the evidence that Kraft gave to us on its plans for Cadbury and comment briefly on a number of proposals which have been put forward to reform the regulation of takeovers as a result of Kraft's acquisition of Cadbury.

2. On 12 January, before the takeover was completed, we took oral evidence from Professor Christopher Bones, Henley Business School; Jack Dromey, Deputy General Secretary and Jennie Formby National Officer, Food and Drinks Sector from Unite the Union; and Ian Lucas MP, Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills. At the time both Cadbury and Kraft were prevented by the City Code on Takeovers and Mergers from discussing the details of their respective positions in public and therefore did not give evidence.

3. Despite strong resistance to the bid, Cadbury's board capitulated a few days after we held our January evidence session. On 19 January Cadbury recommended Kraft's offer to its shareholders. Kraft received formal acceptance of its offer on 2 February and concluded the takeover.

4. At the start of its bid for Cadbury, Kraft announced its intention to keep open Cadbury's factory at Somerdale, which Cadbury had previously earmarked for closure.[1] On 9 February, after the takeover had been completed, Kraft announced that it was no longer able to deliver on that intention.[2] This reversal provoked a public outcry. We therefore decided to hold a second evidence session with senior representatives from Kraft to put its future plans for Cadbury under the spotlight.

5. On 16 March we took further evidence from Unite the Union and from Marc Firestone, Executive Vice President, Kraft; Trevor Bond, President, Cadbury, Britain & Ireland and Richard Doyle, HR Director, Cadbury, Britain & Ireland. We had extended the invitation to give evidence to Irene Rosenfeld, Chairman and Chief Executive Officer of Kraft, an invitation she declined to accept. Marc Firestone explained that Irene Rosenfeld was unable to attend because our evidence session clashed with a Kraft Board meeting in the United States.[3] However, it was pointed out to Marc Firestone that the date of the session was arranged at Kraft's convenience,[4] and had originally been planned for the beginning of March. We have subsequently received a letter from Irene Rosenfeld confirming that she endorses the content of the evidence given by Marc Firestone.

6. Notwithstanding the seniority of Marc Firestone's position within Kraft, we strongly believe that Irene Rosenfeld herself should have given evidence before us, not least because the statements regarding Somerdale's future—its re-opening and then its closure—were made and announced by her. Irene Rosenfeld's attendance would have given an appropriate signal of Kraft's commitment to Cadbury in the United Kingdom and provided the necessary authority in respect of the specific assurances offered to us during our evidence session.

1   Kraft's Takeover Proposal document, 7 September 2009 Back

2   BBC News, Cadbury's Bristol plant to close, 9 February 2010 Back

3   Q 166 Back

4   Q 167 Back

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