Mandelson warning as Kraft bids for Cadbury

'Asset strippers' will face opposition from Government, minister says

Lord Mandelson has warned that the British Government will scrutinise any foreign takeover of Cadbury and oppose any buyer that fails to "respect" the historic confectioner, the subject of a £10.1bn hostile bid from Kraft Foods of the US yesterday.

The Business Secretary said that while the Government would not oppose a takeover of Cadbury purely on the grounds that the buyer was foreign, it would fight any deal it thought smacked of short-term profiteering.

"If you think you can come here and make a fast buck [you] will find that you face huge opposition from the local population... and the British Government," Lord Mandelson said, addressing bidders tempted to asset-strip the company.

"We expect long-term commitment, not short-term profit, to rule," the Business Secretary, who was speaking in Birmingham, the birthplace of Bournville-based Cadbury, added, before warning that any buyer would have to "respect our company, respect our workforce and respect the legacy of our company".

Lord Mandelson's intervention is remarkable given the relaxed attitude the current government has always had to foreign ownership of British assets. The past decade has seen a string of companies, in industries ranging from infrastructure to banking, bought by foreign acquirers with no objection from ministers.

However, Cadbury has a special place in the hearts of many Britons, with its long history in Bournville, and its origins as a partly philanthropic concern that was launched by the Cadbury family, prominent Quakers in the early 19th century.

Concerns have also been raised about the hedge funds with prominent holdings in Cadbury, accounting for about 15 per cent of its share base, and the intentions of Kraft. While the US company has sought to reassure about its plans for employees, Cadbury's allies point out that after it bought Terry's it eventually closed down the UK subsidiary of the confectionery company.

Ironically, given Lord Mandelson's comments, Cadbury's chief executive Todd Stitzer, and Roger Carr, the chairman, have always refused to "wrap the flag" around the company, insisting that any bid would have to be evaluated purely on the basis of the value it offers shareholders.

However, Cadbury's management may now have another card to play. It is possible the British Government could insist on strong guarantees from Kraft, or other bidders, particularly on the levels of employment maintained in Bournville. The industry still remembers the job losses at Rowntree's of York, bought by Nestlé in 1988, where similar guarantees were not sought.

Lord Mandelson was speaking just hours after Kraft announced it would bypass the management of Cadbury's by taking its bid for the confectionery company straight to shareholders, who now have 60 days to decide whether to accept or reject the offer.

The US food giant has not changed the terms of its formal bid, unveiled last month, which Cadbury has attacked as "derisory" and "unattractive". Irene Rosenfeld, the chief executive and chairman of Kraft Foods, said: "We remain confident that the unique combination of Kraft Foods and Cadbury would create a significant growth opportunity for both businesses."

Cadbury, which declined to comment yesterday, now has two weeks to respond and make its arguments against the bid. These will include its recent robust trading, continued cost-saving plans and growth in emerging markets.

Kraft has offered 0.2589 of its own shares and 300p in cash for each Cadbury share. The US food giant's offer valued Cadbury at 716p a share in early trading in the US yesterday. Owing to the fall in Kraft's shares and currency movements that price is well below the 745p a share indicative offer of £10.2bn made by Kraft when it announced its interest on 7 September. Other potential suitors for Cadbury include Hershey, the US chocolatier, and Ferrero, the Italian maker of Nutella.

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