Leading article: A takeover that could still turn sour

Share
Related Topics

Cadbury's capitulation to the advances of the American food conglomerate Kraft has dislodged a healthy dollop of chocolate-coated sentimentalism here in Britain. One member of the Cadbury family reacted with horror yesterday to the acquisition of this 186-year old confectioner by "a plastic cheese company".

Such snobbishness need not be taken very seriously. It is true that Cadbury, with its Quaker roots, has a distinguished history of philanthropy. But the reality is that the days in which the company revered ethics as much as profit ended long ago. Cadbury is now a hard-nosed multinational conglomerate in its own right, albeit a significantly smaller one than Kraft.

The concerns over the future of 4,400 Cadbury UK jobs, the bulk in Bournville and Somerdale, do deserve to be taken seriously. But despite the admission yesterday of inevitable job cuts at Cadbury's Uxbridge head office, it seems alarmist to argue that Kraft is set to impose savage cuts on British operations. Kraft's true target has always been Cadbury's foothold in developing countries such as India and Mexico, rather than its British operations. And that is where the focus of Kraft's management is likely to be.

In any case, the fact is that businesses in Britain floated on the stock market (as Cadbury has been) are for sale to anyone with the money to buy them, regardless of nationality. Successive governments have ensured that Britain's economy is fully open to all investors, with no restrictions on ownership. Whether one agrees with that policy or not (and this newspaper believes the benefits far outweigh the costs) it would be ridiculous for the Government, having sanctioned the sale of airports and power stations to foreign companies, to block the sale of a a confectioner on the grounds of national interest.

A better reason for concern over this acquisition is not history, sovereignty or jobs, but the questionable commercial logic behind it. Kraft has paid a considerable price to acquire Cadbury and will need to borrow $11.5bn to finance the takeover. Kraft's management will have to increase revenues significantly if they are to justify that outlay and make good on the bold promises made to their own shareholders. That is a considerable challenge.

And it might work out. The world's most successful investor, Warren Buffet, for one, believes that Kraft has plenty of scope for growth. He intervened to ensure that Kraft did not mint too many new shares to make this purchase because he believes the US firm is undervalued.

But nothing is guaranteed. And concerns linger that Kraft's management, cheered on by bankers and lawyers and fired by a hubristic ambition to become the world's largest confectioner, have bitten off more than they can chew. Never mind emotive issues about national ownership, when managements start to consider size more important than a clear-eyed assessment of the possibilities for profit that is the time for alarm bells to start ringing.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

PPA Cover Teacher

£110 - £130 per day + Competitive rates of pay: Randstad Education Reading: Pr...

British Sign Language Interpreter

£20 - £23 per hour: Randstad Education Chelmsford: Are you an experienced Brit...

SEN Learning Support Assistant

£50 - £65 per day: Randstad Education Chelmsford: Are you a Learning Support A...

EBD Learning Support Assistant

£50 - £70 per day: Randstad Education Chelmsford: Are you an experienced Learn...

Day In a Page

Read Next
 

Daily catch-up: unbuilt buildings, the new Establishment and polling on Europe

John Rentoul
Nigel Farage has urged supporters to buy Mike Read's Ukip Calypso song and push it up to the No 1 spot  

Mike Read’s Ukip calypso is mesmerisingly atrocious — but it's not racist

Matthew Norman
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London