Wednesday, 20 January 2010

Gordon Brown and Peter Mandelson must do their duty

As I said yesterday, Cadbury is an iconic brand of wonderful chocolate that is proudly British.

Of course, the Cadbury shareholders' interest is important, but it's not all-important. I would have been very doubtful about Hershey as a buyer and I am now even more doubtful that Kraft can add anything to Cadbury, and the Americans may actually do harm to the brand and to the company.

My fears have not be allayed as a result of receiving a message from a very good American friend who has no axe to grind but who says, "I agree [with you]. Kraft is simply trying to find an easy way to grow its stagnant company. The Cadbury brand has a tremendous amount of goodwill, but that name will be worth less under Kraft. English jobs could very well suffer."

Moreover, Mr Todd Stitzer and Ms. Irene Rosenfeld, respectively the chief executives of Cadbury and 'stagnant' Kraft, cause me worry as I genuinely wonder if it's their respective companies' interests that they have at heart - or their own. Each, apparently, is in line for a big payout if the deal is completed.

Nor have my fears been allayed by reading that Legal & General Investment Management (LGIM), which holds 5.1 per cent of the British confectioner, said yesterday that the 850p cash-and-shares bid by Kraft did not reflect the long-term value of the company.

Neptune Investment Management has described Kraft's bid as "unappealing at best."

"This deal is ultimately bad for everyone," said Robin Geffen, Neptune's managing director. "Sadly, Cadbury's management won't fight on and too many large shareholders are focused on very short-term performance."

The Government can and should now do what is needed - Cadbury must remain in predominantly British hands and under British management - and what ministers could and should home in on is the very real danger inherent in 'stagnant' Kraft's offer, the intention of the prospective buyer being to borrow some £7 billions. Even Warren Buffett is reported to be bothered about this. Bigger companies than 'stagnant' Kraft and/or Kraft/Cadbury have been brought down by borrowing too many billions.

The deal is against the public interest with yet another over-ambitious predator becoming over-burdened by debt. This could have dire results.

Gordon Brown and Peter Mandelson must do their duty.

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