The iconic British chocolate manufacturer Cadbury fell last night to an £11.7 billion takeover by the US food conglomerate Kraft.
The deal, struck after hours of negotiations, brings to a conclusion one of the most fiercely contested takeover battles the City has seen in recent years.
It also ends a proud history for Cadbury as an independent company. The chocolate maker, famous for brands such as Dairy Milk and Wispa, dates back to 1824 when John Cadbury, a Birmingham Quaker, began selling cocoa-based drinks in his tea and coffee emporium.
The takeover — which Lord Mandelson, the Business Secretary, had strongly opposed — is likely to be seen as something of a landmark in the British corporate sector.
Lord Mandelson, who was unable to intervene in the bid process, nonetheless warned Kraft last month: “If you think that you can come here and make a fast buck you will find that you face huge opposition from the local population . . . and from the British Government.”
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It will also raise fears of job losses at Cadbury, which employs 45,000 people worldwide, including more than 9,000 in Britain. Unite, the trade union, has warned that Kraft plans at least 10,000 job cuts worldwide to slash costs and repay the cash it will need to borrow for the deal.
Kraft bought Terry’s, another iconic British chocolate company, in 1993 and closed its York factory two years later.
The takeover bid has created a huge outpouring of resentment against foreign takeovers of British companies, particularly in Cadbury’s Birmingham birthplace. In the past four years, more than £292 billion has been spent by foreign companies buying British rivals.
During the past decade, household names such as P&O, O2, Abbey, BAA, Jaguar Land Rover, Pilkington, the glass manufacturer, and Corus, the steelmaker, have all succumbed to foreign takeovers, along with a clutch of electricity and water companies. But few have aroused such strong feelings or emotions as the Cadbury bid.
Kraft owns confectionery brands such as Milka and Toblerone but suffers from a poor reputation among many in the food industry because it makes most of its money from processed cheese and meat. It originally tabled a £10.9 billion bid for Cadbury in September last year. The bid went hostile in November as Kraft made its proposals direct to Cadbury’s shareholders over the heads of its board.
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However, Cadbury and its shareholders strongly resisted, obliging Kraft to raise its terms.
Under the deal that Roger Carr, Cadbury’s chairman, has agreed to recommend to shareholders, Kraft will pay 840p for each Cadbury share and agree to pay a 10p-per-share dividend, making 850p in total. This represents a substantial increase on the 761p or so that Kraft’s original offer was worth and is pitched at about the price a majority of Cadbury’s shareholders had indicated they were seeking.
Cadbury’s decision to recommend the takeover does not mean that Kraft is certain of victory. Hershey, the American confectioner, has until the weekend to table an offer. But few believe that Hershey can outgun Kraft, which is five times its size.
Chocolate box
Cadbury was founded in 1824 when John Cadbury, a Quaker, opened a shop in Birmingham selling tea, coffee, hops, mustard and a new sideline — cocoa and drinking chocolate — designed as an alternative to alcohol
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John and Benjamin Cadbury refined their cocoa process in 1866 to produce a more palatable drink. The cocoa butter created as a by-product was turned into eating chocolate
In 1897 the company created its first milk chocolate. It introduced Dairy Milk eight years later
Dairy Milk became its bestselling product in 1913, and remains so
Cadbury introduced Milk Tray in 1915, Flake in 1920 and a forerunner of Creme Eggs in 1923
The company merged with Schweppes in 1969 to form Cadbury Schweppes. They eventually parted in 2008 when the bulk of the drinks business was sold to Dr Pepper Snapple
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Cadbury is the world’s second-largest confectioner after Mars-Wrigley
It operates in more than 60 countries and employs more than 46,000 people
The company made profits of £638 million in 2008
Source: Cadbury, Reuters, BBC