This post is a follow-up to the post I made earlier regarding the Kraft takeover of the UK's largest confectioner, Cadbury. If you will recall, I was opposed to this move on degustatory and economic grounds. Others were even more adamant--see the image to the right. While there are fine American chocolates alike San Francisco's famous See's Candies, let's just say American mass-market chocolates are not up to snuff. (To those who care, Cadbury represents affordable but good quality chocolates.) Others too had concerns about Kraft adopting typical American corporate raider-style asset stripping of Cadbury assets and laying off of staff. To assuage such fears, Kraft's then-leadership made promises to maintain both,On the positive side of this acquisition, the famous Cadbury brand has spearheaded Kraft's efforts at opening up consumer markets in the world's fastest emerging developing countries--think especially of India:
With the acquisition of Cadbury, Krafts portfolio has expanded beyond 40 confectionery brands, each with annual sales of more than $100 million. Kraft has now become the biggest player in the global chocolate industry with popular [Cadbury] brands like Dairy Milk, Creme Egg, Flake, and Green & Black’s. Kraft’s global market share in chocolates and candies currently stands at 12.5% by our estimates.On the negative side here we are so many months later and, to no one's real surprise, the Yanks do not appear to be keeping their end of the bargain. Indeed, their CEO doesn't even bother to come to the UK when called to explain Kraft's nefarious activities before parliament. Call it choco-patriotism, but it's been classified as an act of high treason akin perhaps to extrajudicially executing Cadbury's British heart and soul. Let's just say all is not well in terms of plant closures, staffing, and integration. And with each UK Kraft gaffe, lawmakers become keener on tightening acquisition laws to repeat this miserable experience:
In addition to owning some of the more popular confectionery brands, Cadbury has also helped Kraft expand its global reach, mainly in the European Union and the Asia-Pacific region. For example, in India, Cadbury is almost synonymous with chocolate, given that the company has been present for more than 60 years in the country selling popular brands like Dairy Milk, 5-Star and Perk. Cadbury also expanded Kraft’s presence in Europe’s chocolate markets of Poland, Russia, and France.
Kraft has indicated that its profits in the Asia-Pacific region have recorded double-digit growth since 2008. Kraft is looking to penetrate the lucrative Indian market by leveraging the Cadbury brand to sell its own flagship Oreo cookies and powdered beverage Tang. India has become the fastest growing market in Asia-Pacific for Kraft with around 40% growth during Q1 2011, double the 20% growth for China and Indonesia.
Ramifications from the bitter battle spread far beyond Bournville, Cadbury’s historic home in the English Midlands. Irene Rosenfeld, Kraft chief executive, continues to ruffle feathers by snubbing UK lawmakers – a parliamentary report on the acquisition, issued on Monday, refers to her failure to respond to their summons as a “sorry episode”. Take-over rules are being redrawn – in a way that bankers warn will hamper the purchase of British companies – after Kraft reversed pledges to keep open a Cadbury plant in Somerdale, west England. (Inspection of the plant, asserts one banker, entailed little more than “a quick Google Earth”.)Ah yes, the missing American overseer:
There is friction in executive suites, too. Welding together two organisations with disparate cultures has resulted in an exodus of senior former Cadbury executives as the nexus of power migrated from the UK to Kraft’s European headquarters in Zurich. The tension reaches all levels of former Cadbury staff, from the commercial division to the factory floor.
All this has left Ms Rosenfeld unfazed. The representatives she sent to appear before a parliamentary select committee were best placed to handle questions about the British market, she says. Speaking to the Financial Times before Monday’s statement from the committee, she said: “We have clearly shown ourselves to be good stewards of the brands, and yet the continued assault has been somewhat surprising. “I think we’ve done everything possible to address concerns, to respond to issues, and the focus remains on making sure that this integration is successful.”And here's something on the legal changes in the works:
Defectors from Cadbury and politicians beg to differ. They say the speed of the integration, allied to the fact that the hostile nature of the bid precluded due diligence, has made the process more fraught. Ms Rosenfeld’s perceived disdain, for workers as well as parliament, has added to the rancour.
This week, in one of the biggest shake-ups of UK dealmaking rules in decades, a round of consultation by the Takeover Panel on proposed changes to rules governing mergers and acquisitions comes to a conclusion. In October, the panel unveiled proposals aimed at redressing the balance of power between bidders and target companies, and improving disclosure for the benefit of employees and shareholders. They are expected to come into effect this year.More on the new measures here. So it's definitely a mixed bag--not all treats with a lot of Yankee tricks mixed in leaving a regrettable aftertaste. I certainly am wary of the Americans screwing over this great brand built over decades for short-term gain as is the habit of a lot of their kind.
The proposed rule changes are the result of a feeling among some senior politicians that UK companies like Cadbury were being acquired for short-term gain at the expense of the best interests of their investors and staff.
Already bankers and lawyers are preparing themselves for the impact of the proposed changes. One is a tightening of the so-called “put up or shut up” period, requiring a publicly named bidder to declare formal intentions within 28 days of an approach. At present, the clock starts ticking at the request of the target company. The aim is to reduce the time a company can be “in play”, after several recent potential takeovers – including Kraft’s – dragged on for months.
