How Kraft Foods took over Cadbury: Merger and Acquisition Analysis – Finance Assignment Help
As Kraft Foods Group presented the hostile bid at a lower value than the already rejected initial proposal, sources within and outside Cadbury, in different realms of the society and politics, responded to explicitly oppose the bidder in its attempt to take over the company without realizing its full value. The Secretary of State for Business, Innovation and Skills, Lord Peter Mandelson warned Kraft Foods Group that it would face a high degree of opposition from the British government along with that from the workforce and the local population, alleging that the group was trying to “turn around a short term profit and make a quick buck” out of the British confectionery giant.
The trade union established in Britain and Ireland, Unite, vocalized its dissent of the proposed acquisition, and in particular expressed strong criticism of the revelation that the takeover was largely funded by the Royal Bank of Scotland, which is 84% owned by taxpayers of the United Kingdom, after it was bailed out of a crisis by the government. The deal generated heated debates in the British Parliament’s House of Commons, where the role of RBS in the deal was strongly criticized. Prime Minister Brown, while maintaining the significance of Cadbury to the British economy, took a stance of minimizing the unwanted effects through negotiating details with Kraft and bringing out a deal that gave positive results to both the company and the country, and noted: “We are seeking assurance and have received information from Kraft about the importance they attach to the Cadbury workforce, to the Cadbury name and the Cadbury quality in the United Kingdom… We hope that the Kraft owners will make sure that Cadbury workers – the 5,500 – can retain their jobs and make sure that new investment goes into a product that is distinctly British and is sold throughout the world.”
As Kraft Foods Group furthered its negotiations in its attempt to take over Cadbury, it offered to let minimum loss occur to its existing shareholders and stakeholders. As per the promises extended by Kraft Foods, the Somerdale factory owned by Cadbury that was the most threatened one in case of a takeover, would continue its operations and not be shut down. It also expressed a decision to invest in the Bournville plant owned by the company in the Midlands. These steps, as they indicated, would preserve the manufacturing jobs in the United Kingdom that would otherwise be affected, and thus should allay the fears of the British government and the local population of England of around 30,000 jobs being put at a risk.
Revisions in the amount to be negotiated brought Kraft to offer a price of 771 pence per share towards the end of January, 2010.
With earlier indications from other organizations, the Takeover Panel gave a deadline of January 25th, 2010 to Hershey and Ferrero, to clarify and make a formal declaration of their intention to make an offer to Cadbury. While Ferrero pulled out of the process, Hershey was no longer expected to make an offer to financially match Kraft Foods Group as its bidding partner Nestle, a much bigger Swiss organization, also pulled out its attempts.
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