Kraft rapped for Cadbury takeover

CHEESE maker Kraft has come under fresh fire for its handling of a factory closure during its controversial takeover of Birmingham-based confectioner Cadbury.

The Takeover Panel, the watchdog body that oversees company bids in the UK, told the US food giant it had failed in its duties regarding the future of the chocolate maker’s Somerdale factory at Keynsham.

Prior to purchasing Cadbury earlier this year, Kraft had initially indicated that it would keep the plant open, safeguarding the jobs of hundreds of workers.

Cadbury, keen to keep operating costs down, was already planning on closing the plant and switching production to a factory in Poland.

However, when the £11.5bn takeover went through Kraft discovered that the closure plans were too advanced and it was left with no alternative than to commit to the shutdown.

A red-faced company tried to justify the decision by claiming that it had not been aware of how far the plans had progressed because Cadbury had not opened its books to the company during the takeover process.

The PR disaster torpedoed Kraft’s hopes of a smooth transition and prompted further hostility towards the company by many in the UK – not all of them Cadbury employees.

Many analysts had been expecting Kraft to mount a charm offensive to placate the critics.

However, it distanced itself from events and senior management declined to comment on the situation.

Furious MPs called the company to account and senior vice president Marc Firestone was grilled by them before apologising for the company’s actions.

The Takeover Panel yesterday censured said Kraft and said it had failed in its responsibilities to investors.

It said the company had failed to provide robust, accurate information to investors during the bid.

When it announced it was considering a bid for Cadbury in September last year, Kraft issued a statement saying: “Our current plans contemplate that the UK would be a net beneficiary in terms of jobs. For example, we believe we would be in a position to continue to operate the Somerdale facility, which is currently planned to be closed, and to invest in Bournville, thereby preserving UK manufacturing jobs.”

The Takeover Panel said it accepted Kraft had made the statement in good faith, However, it said it should not have made such a promise without knowing the full facts.

In its summing up, the panel said: “The Executive has concluded that the statements made by Kraft regarding the Somerdale facility were not prepared to the standards required.

“The Executive accepts that Kraft held an honest and genuine belief that it could keep Somerdale operational. Further, in Kraft’s view, the publicly available information regarding the timing of the Somerdale closure, together with its own expert operational knowledge in relation to factory closure programmes in the industry, provided it with a reasonable basis for holding that belief.

“However, the Executive considers that Kraft should not have made the statements in the form in which it did in circumstances where it did not know the details of Cadbury’s phased closure of Somerdale and its investment in plant and machinery to make products for the UK in its new facilities in Poland.

“Without this information, Kraft’s belief, no matter how well-intentioned, that it could continue to operate the Somerdale facility on a commercial basis was, in the opinion of the Executive, not a belief which Kraft had a reasonable basis for holding.

“Kraft had an opportunity to take mitigating action once it gained access to representatives of the Cadbury management team, which first occurred on the night of 18/19 January. Kraft was told on that night that the phased closure of Somerdale was well advanced, that money had been committed, and that both equipment and people had been, or were in the process of being, moved out.

“However, Kraft did not take this opportunity to seek further information from Cadbury in order to establish whether the closure was so far advanced that it was unrealistic to reverse it.

“Kraft is hereby criticised for not meeting the standards required.”

Kraft has said it will not appeal the decision.