Economic, Social and Political Significance of Cadbury Takeover by Kraft Foods Group

Kraft Foods Group, Inc., a North American grocery manufacturing and processing conglomerate with headquarters in Northfield, Illinois finalized the takeover of 71 % of shares of Cadbury, a globally renowned British confectionery company with headquarters in Uxbridge, London, England on 2nd February, 2010. On the 5th of February, 2010, it increased the percentage of shares to reach the target of 75% that was needed so as to enable the de-listing of Cadbury from the stock market and fully integrating it as part of the Kraft Foods Group. Cadbury is now a fully owned subsidiary of Kraft Foods Group.

The deal of Kraft Foods Group acquiring the confectionary giant was brought into effect after negotiations that continued for five months after the acquiring company made its first bid for the takeover.

The process of reaching a final mutually agreed upon deal included initial offers and hostile bids that Kraft made in its attempt to persuade Cadbury to be merged with it.

The merger of Kraft and Cadbury is a strategically significant one to the business scenario of the confectionary market all over the world. Kraft Foods is the largest food processing firm in the world with revenues over $40 billion and a presence in more than 150 countries and a huge market capitalization of $53 billion. Cadbury, on the other hand, was a public company listed in the FTSE 100 list and was the second largest confectionary company in the world at the time of the acquisition, second to Mars, Inc and with operations in 60 countries. The high potential of growth coupled with an impressive and detailed market experience and reputed brand name in the emerging markets of the world made Cadbury a very attractive acquisition target for Kraft Foods.

The acquisition increased the potential of Cadbury from the second largest confectionary producer to the combined company leading the world market of confectionary food manufacturers and processers. The merger of Cadbury as a subsidiary created a combined total portfolio for Kraft Foods consisting of 40 confectionery brands, each with annual sales in excess of $100 million.

The deal was also socially significant as a large established company with a huge market share and a large number of employees (about 30,000 jobs were estimated to be at risk in case the operations of Cadbury were dissolved from the holding of the UK based company) and holding a brand name that had come to be associated with great significance to the industry in the United Kingdom stood to be dissolved and merged into a foreign conglomerate. This generated widespread reactions of resistance in the British society and politics that feared a risk of thousands of job losses over and above the concerns expressed by the shareholders over the advisory fees charged by the banks for mergers and acquisitions. Several political leaders in the United Kingdom expressed their disapproval of a foreign organization taking over the operations and entity of one of their largest companies that the country had huge economic and social stake in.

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