Leading article: A sweet deal for the economy?

Share
Related Topics

Cadbury's strong performance in recent months shows that Britons have maintained their appetite for chocolate throughout the downturn. But does the takeover bid for Cadbury by the American food giant Kraft suggest that investors and corporations are recovering their appetite for large deals? The answer is ambiguous.

The food industry is something of a special case. It has traditionally been better able to withstand the headwinds of recession than other sectors of the economy. People tend to cut back on big ticket purchases and expensive holidays when times get hard, but they still have to eat. They also tend to find comfort in small treats such as chocolate.

The costs of the industry have also come down as global food commodity prices have generally fallen back. So before getting overexcited, we should remember that firms in the sector have always enjoyed relatively more freedom of movement during downturns. Also, many of the large takeover deals at the height of the boom were financed by the abnormally cheap credit that the banks were churning out. Those conditions are not going to return any time soon.

That said, the first unsolicited takeover bid from a blue-chip firm since the downturn hit could well be an indication that something approaching normality is beginning to return. Kraft's bid follows other signs of life in the corporate sector, such as Proctor & Gamble's sale of its pharmaceutical business for $3.1bn and Disney's acquisition of Marvel Entertainment for $4bn. When one considers that UK mergers and acquisitions activity hit a 40-year low this year, such signs of life are significant.

The size of the proposed deal (£10bn, which Kraft has indicated it will partly raise by selling bonds) highlights something else too. The availability of credit for larger companies has improved. Private money is coming in off the sidelines and investors are willing to lend again. The caveat is that it is still hard for viable smaller companies to get finance from banks. A strong recovery will remain elusive until that particular pipe is unblocked.

This takeover bid is a potential treat for Cadbury's shareholders, who stand to make a fat profit if it proceeds. But we shall have to wait longer to see whether it heralds significantly sweeter days ahead for the global economy.

React Now

Latest stories from i100
SPONSORED FEATURES
iJobs Job Widget
iJobs General

Recruitment Genius: Sales Executive or Senior Sales Executive - B2B Exhibitions

£18000 - £30000 per annum: Recruitment Genius: A Sales Executive or Senior Sal...

Recruitment Genius: Head of Support Services

£40000 - £55000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Warehouse Team Leader

£22000 per annum: Recruitment Genius: This industry leading company produces h...

Recruitment Genius: Business Development Manager / Sales - OTE £40,000

£20000 - £40000 per annum: Recruitment Genius: This IT provider for the educat...

Day In a Page

Read Next
 

Up Ankara, for a tour of great crapital cities

Dom Joly
 

Rebekah Brooks to return? We all get those new-job jitters

John Mullin
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future