Cadbury is preparing for a big takeover battle after it rejected Kraft's offer
Boardrooms on both sides of the Atlantic are preparing for a financial food fight.
In one corner there is Cadbury, the British brand with a social conscience started by Quakers nearly 200 years ago. In the other is Kraft, the US company that turned processed cheese into a multimillion-dollar empire.
Cadbury is preparing for a big takeover battle after it rejected a surprise £10.2 billion proposal from the company, which produces of some of the world’s best-known snacks.
The outcome will determine the future of one of Britain’s best-loved brands, which started as a tea and coffee shop in Bull Street, Birmingham, and employs 7,000 people in Britain and 50,000 worldwide. Kraft is seeking to lure Cadbury investors with a mixture of cash and American-listed shares, valued at about a third more than Cadbury’s share price on Friday.
In return, famous brands — including Dairy Milk, Creme Egg, Flake, Cadbury’s Eclair and Trident chewing gum — would be taken on by Kraft, which already owns Philadelphia cheese, Oreo biscuits and Toblerone chocolate, to create a formidable food giant with $50 billion in revenues.
Irene Rosenfeld, the chairman and chief executive of Kraft, who admits on the company website that her childhood ambition was to be president of the United States, said that she wanted to create a “formidable global powerhouse of snacks, confectionery and quick meals”.
Kraft, the world’s second-biggest sweetmaker after Nestlé, has promised that it would protect Cadbury’s heritage. It also offered an unexpected reprieve for the 500 staff who work at the chocolate factory at Somerdale near Bristol, which Cadbury had earmarked for closure.
But the US group did suggest savings yesterday of $625 million in manufacturing and administration to support its offer — an ambition that will concern staff at Cadbury’s headquarters in Uxbridge.
Even as Ms Rosenfeld outlined her plan, City pundits were weighing the odds on a rival consortium offer. Possible bidders include Nestlé and Hershey’s. Ms Rosenfeld recently said: “There is nothing more exciting to a consumer than grilled cheese and a bowl of soup.”
Nevertheless, it is understood that Kraft covets Cadbury’s chocolate and gum sales, which are expanding at a faster rate than Kraft’s more humdrum businesses.
The bid will bring back memories of the bitterly contested takeover of Rowntree, the creators of KitKat and Smarties. It was bought by Nestlé in 1989 in a controversial deal, which provoked outrage and insults from workers, Labour MPs, York city grandees and the Joseph Rowntree Foundation.
This time, well-known shareholders hold stakes in both companies — Berkshire Hathaway, the fund managed by Warren Buffett, controls almost 10 per cent of Kraft, while Nelson Peltz, the corporate raider, has shareholdings in Cadbury and Kraft.
Legal & General, Cadbury’s biggest investor with a 5.4 per cent stake, agreed with management yesterday in rejecting Kraft. However, Cadbury, a British brand for almost two centuries, may struggle to draw upon patriotic sentiment as almost all of its top 20 investors are American companies.
Despite being American, Todd Stitzer, the chief executive of Cadbury, is expected to raise a similar rallying call for his company that was founded by John Cadbury in 1824 as alternative to selling alcohol.
Cadbury’s son, George, further developed the company’s socially progressive streak, by providing his workers with housing, education, and training.
Even today the company, which sponsored Coronation Street for ten years, plays on its heritage, the Cadbury family’s commitment to social justice and their part in the abolition of the slave trade.The original Kraft company was a cheese business established in 1902, but today’s food conglomerate was put together by Philip Morris, the tobacco business. In 1985 it began a campaign to build a food empire, bidding for General Foods, followed by Kraft in 1988 and Nabisco in 2000. The tobacco company, renamed Altria, spun off Kraft in 2007, which then went on to acquire Danone’s biscuit business.
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