BBC News - Cadbury agrees Kraft takeover bid Cadbury agrees Kraft takeover bid Union: 'Sad day' for Cadbury Cadbury is to be taken over by the US food company Kraft after its board approved a new increased bid. The Cadbury board has advised its shareholders to accept a new offer of 840 pence a share - valuing the company at £11.5bn ($18.9bn). Kraft said the deal would create a "global confectionery leader". But there are renewed fears over possible job cuts at Cadbury's UK operations as a result of the agreed takeover. Shareholders have until 2 February to give the deal their backing, with the US confectioner Hershey apparently out of the race. The offer will consist of 500 pence in cash, with the rest made of Kraft shares. Kraft will borrow £7bn ($11.5bn) to finance the deal. The increase in Kraft's debt to pay for Cadbury will doubtless worry its employees BBC business editor Robert Peston Send us your comments "We believe the offer represents good value for Cadbury shareholders...

and will now work with the Kraft Foods' management to ensure the continued success and growth of the business," said Cadbury's chairman Roger Carr. Irene Rosenfeld, the chairman and chief executive of Kraft Foods, said the deal was good news for shareholders and staff. "We have great respect for Cadbury's brands, heritage and people," she said. "We believe they will thrive as part of Kraft Foods." Shareholder approval The deal is a significant increase on earlier Kraft bids, which were flatly rejected by the Cadbury board as "derisory". Kraft's previous offer valued the company at £10.5bn - a bid Cadbury's chairman Roger Carr said was an attempt to "buy Cadbury on the cheap". Shareholders are expected to agree to the takeover. David Cumming, head of UK equities at Cadbury shareholder Standard Life, said that he would be agreeing, despite hoping for a higher price. CADBURY John Cadbury, a Quaker, opened a shop in Birmingham in 1824, selling tea, coffee and hot chocolate - as an alternative to alcohol Dairy Milk brand introduced in 1905, with Milk Tray coming 10 years later Merged with rival confectioner J.S.

Fry & Sons in 1919 Merged with Schweppes drinks business in 1969. Its drinks arm was spun off in 2008 Employs about 45,000 people in 60 countries Cadbury brands include: Dairy Milk, Flake, Crunchie, Chocolate Buttons and Milk Tray "I won't go against the view of Cadbury's management," he told the BBC. "Kraft are getting a good deal. It's sad that Cadbury is gone, but business is business." In early trading on Tuesday, Cadbury shares were up 3.5%. Job fears Unions have expressed concerns that the Kraft takeover could cost jobs. The company has given no specific assurances over the future of 4,500 UK jobs, though it says it wants to invest in the Bournville site and maintain production at Somerdale, near Bristol, also known as Keynsham. It has not ruled out cuts, and staff numbers at Cadbury's head office in Uxbridge are expected to be reduced, according to the BBC's business editor Robert Peston.

KRAFT FOODS Founded in Illinois as a cheese wholesaler in 1903 Bought in 1988 by Philip Morris, which also purchased Nabisco for $19.2bn in 2000 before integrating it into Kraft Foods More than 40 of its brands are more than 100 years old Has 98,000 employees and 168 manufacturing and processing facilities worldwide Kraft brands include: Kenco, Ritz, Philadelphia spread, Tang, Alpen Gold and Oreo Kraft also said it expected "meaningful cost savings" as a result of the merger. Jennie Formby from the Unite union said the need for Kraft to cut costs could mean staff cuts in the longer-term. "We are concerned about the levels of debt that Kraft has," she told the BBC. "The sad truth is that when they have to pay down that debt, the soft option is jobs and conditions. "When you have to make cost savings of the magnitude they will need to make, you have to ask where those cost savings will be made." Those fears were shared by David Bailey, professor at Coventry University Business School. "Serious questions need to be asked about Kraft's intentions," he said.

"Kraft already has a track record of cutting production and moving production abroad. There's no guarantee that they'll keep production in the UK in the long run." Bookmark with: Kraft and Cadbury: What does the future hold? - BBC News BBC News Kraft and Cadbury: What does the future hold? 1 February 2013 Close share panel Image caption Kraft has invested in Bournville after its 2010 takeover, unions said Three years since Cadbury was taken over by Kraft, despite multi-million pound investment, workers in Birmingham still have concerns about the future. A new packaging line has been installed at the Bournville plant, which has now also become the centre of the firm's research and development arm. In 2010, when Kraft controversially bought Cadbury for £11.5bn, it said there would be no compulsory redundancies in manufacturing for two years. A year later, it said 200 jobs would have to go but it was making a UK-wide £50m investment - £14m at Bournville. So what does the future hold for the chocolate giant?

Workers were told earlier this month that the "pace of change" will be "ramped up" this year, which has left many apprehensive about their jobs, the Unite union said. Peter Taylor, union convenor at Bournville, said the last three years have been difficult as staff wait for it to be made clear where the jobs cuts are to happen. 'Ramp it up' "At a meeting in January, the company told us that they believe the pace of change was going too slow, as they see it, and they would be ramping up this year's changes that they need to satisfy the business," he said. "So far only 20 people have gone and management continue to analyze the company's efficiency which leads some to worry. Image caption Mr Taylor said he hoped the firm continued to believe in Bournville "It's not been as bad as anyone thought but that doesn't mean morale in the factory and general opinion is low. "The investment has come in and people know technological changes would mean less jobs on the shop floor. "They're also looking at what everybody does in every room.....however, what's happening at Bournville is happening everywhere.

"If they [Kraft] get more than 180 offers [from staff] to go and they can pay it, they would do it." In March last year, Kraft announced that it had split into two independent companies. Bournville is known for chocolate and will continue to be known for chocolate. It is essential to our success Spokesman for Mondelez One focuses on its North American food business, retaining the Kraft name, while Cadbury is part Mondelez, the global snacks arm with the name chosen by staff. Professor David Bailey, from Coventry University Business School, said he was pleased Kraft had divided the company, stepping back from its "big is beautiful" philosophy. The firm owns brands including Kraft and Philadelphia cheeses, Capri Sun, Trident gum and Oreo biscuits. He said: "Cadbury or Mondelez is a significant player in the UK. "I want them to be successful, they have excellent research and development here now. 'See it though' "I think two of their five global research centres are here, there's a new packaging line at Bournville which is also the centre of the development and design of products so that's all really positive.

BBC Local Live Join us on Facebook "I'm not saying however that the takeover was a good thing - I'd rather it stayed as Cadbury. "Kraft seemed to believe that 'big is beautiful' which was something I've always criticised and I'm glad that they have realised that isn't the best way and split the company. "But now Mondelez is doing what Cadbury could have done without being taken over." Mr Taylor said he was happier they were not part of the US side of the business. He said: "We're glad for the investment here on site and we are aware that the European factories can make things cheaper. Kraft has the capacity. "But we've not had many Kraft products that we'd like to make here offered to us yet. What we do understand is most of the products made at Bournville are sold in this country Peter Taylor, Unite "What we do understand is most of the products made at Bournville are sold in this country. "We've gone from Cadbury to Kraft to Mondelez, now we have become the European arm of Kraft and we see that as being better than being under American ownership. "I think we're probably in a slightly better position that we were.

"We've the technology and I think we have experts to do it here, it's whether Kraft are going to believe in the people of Bournville and let them see it through." A spokesman for Mondelez said Bournville was "not a site in decline". "It won't be a research and development site, it's manufacturing as ever," he said. "Bournville is known for chocolate and will continue to be known for chocolate. It is essential to our success." He said the company expected to make the job cuts through voluntary redundancies. Sweet revenge: Cadbury heiress angered by Kraft takeover sells £30m house to launch rival to 'American plastic cheese company' | Daily Mail Online Sweet revenge: Cadbury heiress angered by Kraft takeover sells £30m house to launch rival to 'American plastic cheese company' comments A Cadbury heiress has sold her £30million mansion to fund a new rival chocolate firm after her family company was sold to American 'predators' Kraft. Felicity Loudon, whose great-grandfather George Cadbury founded the iconic sweets brand, hopes the sale of the Grade II-listed Cotswolds home, could help her launch a new family business.

The 62-year-old vowed to sell 14-bedroom Pusey House two years ago after Kraft's aggressive takeover - but it took longer than expected to find a buyer for the home. Beauty: Pusey House, formerly owned by Cadbury heiress Felicity Loudon, has sold after two years on the market The mansion also includes six reception rooms, a gym, a billiards hall, indoor and outdoor pools, a tennis court, polo ground, stables, various cottages, woods and pastures. Felicity, 62, led a failed campaign to prevent the eventual £11.5 billion takeover of the Birmingham confectioner, memorably labelling the new owners an 'American plastic cheese company'. The interior designer is more used to doing up homes, but is now hoping to come up with a 'quirky' new brand of chocolate. RELATED ARTICLES Share this article Share She said: 'I can't accept that Cadbury has gone to America. To a plastic cheese company. Family fortune: Felicity Loudon's great grandfather was George Cadbury, right, founder of the chocolate empire 'I won't accept it. I want to start again.

I want to make chocolate and I'm jolly well going to do it.' She added: 'I'm not going high-end, which is what everybody thinks I'm doing. I want it to be affordable. I want it to be quirky. I want a child to want to buy it. 'I want it to bring out the child in you. I want to get away from additives. Sold: The Birmingham confectioner was founded by Felciity's great-grandfather George, but sold in a billion-pound takeover to Kraft 'Everything about it, apart from the cocoa bean, has to be British, and that caused huge problems. 'I never realised that foreign predators could come and take our British companies, and I feel this is so wrong. CADBURY BATTLE LEFT BITTER AFTERTASTE Kraft launched its hostile takeover bid for Cadbury in December 2009. The move provoked a massive public reaction, with a campaign by The Mail on Sunday to ‘Keep Cadbury British’ gaining the support of celebrities and 28,000 readers. But in January 2010 Cadbury shareholders voted to accept an £11.5 billion offer from Kraft.

After winning its bitter battle to take over the sweet-maker, Kraft closed Cadbury’s Cheltenham headquarters as part of its drive for integration savings, resulting in job losses and relocations. The company also came under fire for moving some Cadbury jobs to its European headquarters in Zurich so it can reduce its corporation tax burden in the UK. Kraft boss Irene Rosenfeld promised to save Cadbury’s Somerdale factory near Bristol, but after completing the deal provoked fury by announcing production would move to Poland, with the loss of 400 jobs. However, Kraft claimed the merger was being handled sensitively and it is investing heavily in Cadbury’s Bournville plant in Birmingham. 'I would love it to be a success, love it to be seen not as a replacement for Cadbury but in a way as a memorial to my grandfather.' Felicity, who cannot use her birth name as it is owned by Kraft, married John Loudon in 1996. His family are Dutch aristocrats and pioneers of Shell. The couple bought Pusey in 1997, but they began to feel like they were rattling around in the large house. Felicity said: 'Wanting to make chocolate provided the final nudge.

But I do cry about leaving.' She came up with the idea of creating her own confectionery after journalists interviewing her planted the seed of starting her own company. Although the family had floated Cadbury in 1962 and Felicity was merely a minor shareholder, she was asked to talk to reporters about the takeover. ‘All of a sudden the world went mad. I was styling in Gloucestershire in a freezing house. 'Sarah [her PA] rang and said, “Get the hell back here! Sky News is camping at the door, followed by Jon Snow.” 'Every single interviewer asked, “Are you going to make your own chocolate?” And I always said, “No, I don’t think so.”’ But her determination is not to be underestimated: aged just six she fought off a kidnapper.

And she told the Daily Mail last year: 'The more people tell me I’m mad, the more I want to do it.’ Cadbury's board agrees £12bn sale to Kraft | Business | The Guardian Cadbury's board agrees £12bn sale to Kraft US food giant's offer accepted by Cadbury's board despite misgivings of trades unions Monday 18 January 2010 20.13 EST First published on Monday 18 January 2010 20.13 EST Close This article is 7 years old Cadbury will accept defeat in its battle to stay independent today by recommending a £12bn takeover from US rival Kraft that threatens to reignite a fierce debate about the vulnerability of British industry. The 186-year-old chocolate maker decided to throw in the towel late last night after a large foreign shareholder joined hedge funds in indicating it would accept an improved offer from Kraft, and the prospect of a rival bid from Hershey faded.

Cadbury's board, led by chairman Roger Carr, will announce its decision to recommend the revised 850p-a-share bid to all shareholders through a ­statement to the stock exchange this morning, according to sources close to the company. Although a board recommendation is not binding, it is highly unusual for a ­company to resist a hostile takeover once its management has capitulated. The confectionery giant joins a list of British industrial names to have fallen to foreign takeovers in similar circumstances in recent years. More than 50 ­leading companies have gone, including BAA, Boots, Cazenove, Corus, ICI, Jaguar Land Rover, P&O, Pilkington and Scottish Power. Until now Cadbury had fought a public campaign to preserve its independence, attracting support from Lord Mandelson, the business secretary, who warned Kraft to expect "huge opposition" from the ­government if it wanted to make a "fast buck" by buying Cadbury. His intervention is ­understood to have rattled Kraft's chief executive, Irene Rosenfeld, who recently met shareholders in London, but the US company chose to negotiate a raised offer after calculating that the political risk was manageable.

Cadbury unions have warned that up to 30,000 jobs would be put at risk by the deal as Kraft would be weighed down by some £22bn in debt. Kraft has a record of aggressive cost-cutting, and the union Unite said that between 2004 and 2008 it shed 19,000 jobs and closed 35 sites to help reduce its debt. Today's bid of 850p-a-share (including a 10p dividend) is an increase on Kraft's previous offer of around 770p in cash and shares, which Carr had previously described as "derisory". Nonetheless it is at the low end of many independent experts' predictions for an agreed price and comes after Cadbury's chief executive, Todd Spitzer, appeared to suggest he thought its shares were worth £10 each. A source close to Cadbury said the decision had been taken with "a heavy heart" but followed advice from its investment bankers that any increase in Kraft's bid beyond 830p would succeed. More than a quarter of Cadbury shares are now in the hands of hedge funds which bought them in the hope of a deal.

The final straw came when Franklin Templeton, a large US mutual fund with a 7% stake, indicated it would accept 830p. The circumstances of the defeat are likely to reopen a debate about the role of hedge funds and other investors during takeovers. Lord Myners, the City minister, has been vocal in his criticism of short-termism among institutional fund managers. Cadbury was the first big test of a supposed new mood after the financial crash and raised strong emotions because of its history as a progressive employer, supporter of fair trade and proponent of good corporate governance. Nevertheless, its management's actions appear to have followed a well-worn path in such situations. Carr cut his teeth as chief executive of Williams, an industrial conglomerate also sold overseas, and worked with Sir Nigel Rudd, who recommended the sale of Boots two years ago. Under Takeover Panel rules, Kraft had until midnight tonight to raise its offer. There is still a chance that Hershey may intervene, but sources close to Cadbury last night said that was unlikely.

Editorial: Cadbury is not the national champion and Quaker exemplar of tabloid legend, but its sale is still a crying shame Published: 19 Jan 2010 The Cadbury deal: How it changed takeovers - BBC News BBC News The Cadbury deal: How it changed takeovers By Ben Morris Business Reporter 2 May 2014 Close share panel Image copyright Getty Images The takeover of Cadbury by US based Kraft in 2010 prompted a revamp of the rules governing how foreign firms buy UK companies. Many in the world of mergers and acquisitions felt that it had become too easy for foreign firms to buy UK rivals and the process had become a little murky. The Panel of Takeovers and Mergers , which regulates this area reviewed the laws and in September 2011 changes were made to the Takeover Code. Broadly it strengthened the hand of target companies, and demanded more information from bidders about their intentions after the purchase, particularly on areas like job cuts. That became a big issue when Kraft bought Cadbury. Just a week after promising to keep Cadbury's Somerdale factory, near Bristol open, Kraft backtracked and said it would close the plant.

Kraft later defended itself by saying that when it had more information it realised it was not "feasible to keep Somerdale open". So changes to the takeover code mean Pfizer has given more detail about its intentions for AstraZeneca if the deal were to happen. Here are some of the key areas of the takeover process that were amended after the Cadbury deal. Image copyright Reuters Under 2011 changes to the takeover code, bidding firms are required to give more information about their intentions towards the firm after the takeover. That includes potential repercussions for jobs and assets like factories. The bidder also has to offer information about the locations of company headquarters. Pfizer has pledged that if the deal went ahead, 20% of the combined company's R&D workforce would be based in the UK. The US firm said its commitments would be valid for five years, unless circumstances changed significantly. Salmaan Khawaja is a corporate finance director, at Grant Thornton and worked at the takeover panel for two years. "The way Pfizer is conducting itself is very different from the way Kraft was perceived to have operated," he said. He says Pfizer's behaviour is not just about complying with the revised rules.

"They don't want to be seen as a predator going after a UK brand aggressively". Changes in 2011 also gave greater prominence to the views of employees. Representatives of the staff of the target company can give their views on the takeover. Image copyright Getty Images Changes to the Takeover Code require target companies to name who is interested. Previously bidding companies could hide behind anonymity, which strengthened their position. This is not a particularly big issue in the current Pfizer bid. Although Mr Khawaja notes that Pfizer has offered a lot of detail about its possible bid. "They could have put out a few sentences and stopped there, it shows they have put in a lot more groundwork," he says. Mr Khwaja thinks that kind of detail could serve a purpose. "It could be helpful in conversations with shareholders... it could flush out their thoughts," he said. "Though, of course, the shareholders would get the opportunity to decide on the merits of the bid if and when a formal offer is made," he added. Image copyright Thinkstock In 2011 deal protection measures were banned. Previously bidding companies could insist on an inducement fee - a payment which would be lost if the deal fell through.

It would typically be 1% of the offer value and were a feature of most big deals. The banning of those payments, boosts the position of target companies and in this case AstraZeneca. The inside story of the Cadbury takeover The inside story of the Cadbury takeover Read next March 12, 2010 by: Jenny Wiggins Todd Stitzer had been working for Cadbury Schweppes for nearly 20 years when he was called by its chief executive one day in February 2000 and handed a mission to complete. Harvard-educated and ambitious, the 47-year-old ­American, then based in Dallas, Texas, had won attention at Cadbury’s London headquarters for masterminding the acquisition of several soft drinks brands in the US, including 7UP and Dr Pepper. Now his boss, John Sunderland, wanted him to move to London to do the same thing for the confectionery side of the business: get out there and start buying companies.

It had been three decades since a merger between a revered British confectionery group and a ­­­­soft drinks brand created by a German-Swiss watchmaker had formed Cadbury Schweppes, and Sunderland had made some decisions about the company’s future. Cadbury was number three in the global soft drinks market, but he knew it would never overtake the two leaders, Coca-Cola and Pepsi. On the other hand, the market for chocolate and other sweets was much more open, split among a big group of international companies including Mars, Wrigley, Kraft, Hershey, Ferrero and Nestlé. “We had a real opportunity to become the leading confectionery house,” Sunderland says. Two weeks after his discussions with Sunderland, Stitzer moved from New York to London to become the company’s chief strategy officer. He put together a team to evaluate possible acquisitions and got to work. After one more big soft-drinks deal – the purchase in late 2000 of Snapple for £986m from Triarc, an American restaurant chain – Stitzer’s team turned its attention to confectionery companies.

“Forever Cadbury lusted after being the largest chocolate company in the world,” Stitzer says at Cadbury’s headquarters in an office park in west London. That’s where its roots were, after all – drinking chocolate. “But the fastest-growing, highest-margin part of the confectionery business was the gum business.” His team, with Sunderland’s approval, started chasing chewing-gum brands, picking up names such as Hollywood and Dandy. In December 2002, they made a bolder move, spending $4.2bn to buy a gum company called Adams that had been put up for sale by the US drugs company Pfizer. Adams was not the biggest gum group in the US – that title was held by Wrigley – but its products were desirable: Trident sugar-free gum, Dentyne Ice chewing gum and Halls cough lozenges. More important, the deal made Cadbury the biggest confectionery company in the world, albeit on the back of a wider range of products than simply chocolate and sweets. Nor was the deal just a gambit to gain prestige.

Profit margins in Cadbury’s core confectionery business had been falling in the late 1990s and early 2000s, indicating its growth was in decline. “The performance of the company was not exciting,” says Roger Carr, who took over from Sunderland as chairman in July 2008. “There was slow growth, and people were not at all enamoured by the business model. Few institutions in the UK wanted to buy the stock. The only people who saw investment potential were the Americans.” Acquisitions alone wouldn’t solve Cadbury’s problems, according to Stitzer. Its organic growth was weak because it was spending less than its peers on marketing, innovation and capital expenditure. “We agreed as a team,” he says, referring to Cadbury’s top executives, “that we would revitalise Cadbury around a revenue-growth model that would deliver financial benefits if managed or operated in the right way.” Analysts and investors, however, were sceptical about some of the purchases that were supposed to support that strategy, particularly the deal to buy Adams. Many believed Cadbury Schweppes had overpaid.

Its share price, which had approached 600p on the London Stock Exchange in 2002, slid close to 400p in early 2003. In May 2003, the company’s board – undaunted by the market’s scepticism – asked Stitzer to take over from Sunderland as CEO, citing him as the best person to lead the company forward in its “continuing drive for growth and efficiency”. Sunderland moved up to become chairman. If anyone before had doubted the direction in which Stitzer wanted to take Cadbury, it became clear during a series of financial presentations he made to investors in London and New York that October. He outlined an ambitious restructuring programme, Fuel for Growth, which aimed to achieve substantial increases in sales and profits between 2004 and 2007. Stitzer also followed Sunderland’s thinking back in 2000 to its next logical step. Inside the company, a conversation began about getting out of soft drinks. Although the Adams acquisition had made Cadbury the world’s biggest confectionery group, its global market share was just 10 per cent – so it retained only a slim lead over its competitors.

For decades, Cadbury’s management had fantasised about teaming up with Hershey. The American company had bought the licence to make and sell Cadbury-branded products in the US in the late 1980s and was considered an ideal partner. In 2002, Cadbury joined forces with Nestlé to try to buy Hershey (which also owns the US licence to Nestlé’s Kit Kat brand), while Wrigley also made an offer. But Hershey is run by a charitable trust reluctant to lose control of the company, and it backed away from a sale before any deal could be completed. Stitzer believed Cadbury could broaden its deal-making options if it had more firepower. If it sold the US drinks business – estimated to be worth up to $13bn – it could target other confectionery companies such as Italy’s Ferrero (which owned brands like Ferrero Rocher and Kinder) as well as the European arm of Kraft, which included brands such as Milka, Côte D’Or and Toblerone.

“We had roughly a one-tenth share of the global confectionery market and felt there were opportunities that would allow us to get to 15 per cent or 16 per cent,” Stitzer recalls. “But we needed significant financial assets to get us there.” While Stitzer and his management team were planning global domination of the confectionery world, Cadbury Schweppes investors were worrying about the company’s financial performance. In early 2006, the company decided to off-load its European soft drinks brands, which included Orangina and Oasis, for €1.85bn to private equity fund Lion Capital and hedge fund Blackstone. (Three years later, after increasing sales and profits, Lion and Blackstone sold Orangina Schweppes to Japan’s Suntory Group for €2.6bn.) The sale led to market speculation that Cadbury might also be on the verge of selling its US drinks brands and the company’s stock price rose. In public, however, Cadbury executives remained tight-lipped. The year 2006 was a bad one for Cadbury.

Salmonella contamination in some of its British factories forced it to recall more than a million chocolate bars, a safety breach that earnt a £1m fine. Its profits were hit by an accounting scandal in Nigeria, and the Fuel for Growth plan missed its financial targets. What investors didn’t know was that in October 2006, Cadbury’s management had recommended to the board that it should get rid of the US brands. But nothing was said in public to that effect. In fact, at an investor conference in London that same month, Cadbury’s management indicated they had no plans to split the remaining soft drinks and confectionery businesses. They did, of course, but there was no agreement about how to do it. Sunderland, as chairman, was reluctant to sell without having lined up a confectionery deal on which to spend the proceeds, worrying that unless they did that, Cadbury would turn itself into a takeover target for a rival. It was a case of eat or be eaten. For his part, Stitzer now says he didn’t want to set rumours running in the market by hinting at a sale before Cadbury was ready to go ahead.

“What you don’t want to do is create a speculative frenzy about a particular asset: it’s deleterious to the running of the business.” Equally, he and his fellow managers would have been unwise to try to force their board into agreeing to a sale by letting word of the idea leak out. While management and the board debated what to do, a figure from Cadbury’s recent past reappeared on the scene. Nelson Peltz was the founder of a hedge fund called Trian Fund Management and the investor behind Triarc, the restaurant chain that had sold Snapple to Cadbury six years before. Now, he started taking an active interest in Cadbury once again. Peltz liked confectionery. He believed it had strong growth potential and was not hampered by competition from supermarket “own label” brands, as is the case with so many other products. He began buying shares in Cadbury Schweppes in late 2006 and arranged a meeting with Stitzer in London in February 2007.

At that meeting, Peltz told Stitzer that Cadbury Schweppes should be achieving the same kind of profit margins as Wrigley and Hershey, and that he wanted to see its US soft drinks and confectionery businesses separated. His vision for Cadbury was similar to Stitzer’s. What Cadbury’s management didn’t realise was that Peltz wasn’t focused on Cadbury Schweppes alone. In 2007 he also started buying shares in the US food company Kraft, eventually building a 3 per cent stake. Peltz told Kraft it too could grow faster if it slimmed down. Get rid of brands such as Maxwell House coffee, he said. Get rid of Post Cereals. See what doors opened from there. Peltz’s attempts to agitate for change progressively gained support. In early 2007, around the time of his meeting with Stitzer, Cadbury Schweppes’ board learnt that one-third of its shareholder register, which was weighted towards US investors, was pushing for the split. This put the directors in a difficult position.

They had been holding serious talks again with Hershey about some kind of merger, but as had happened so often in the past, there was a significant risk that the conversation would go nowhere. The board decided to allow management to go ahead with its plan to split the company, reasoning that they would rather try to control their own destiny than deal with a long-running “war of attrition” from shareholders who wanted to see the US soft drinks brands sold. “The risk of separation was that someone might come along and seek to buy Cadbury Schweppes,” says Carr, who had joined the Cadbury board in 2001 and became its deputy chairman and senior independent director in May 2003. “But the risk of staying as you were was to run the business inappropriately [by not maximising value for shareholders]. And boards can’t do that.” In early 2007, Cadbury Schweppes started discussions with private equity firms over a possible sale of the US drinks brands. Its timing could not have been worse. In August, the years of cheap borrowing that had funded ever larger deals came to an abrupt halt – the first hints of the credit crunch that would precede a global financial crisis.

Suddenly, private equity companies were struggling to raise the money they needed to pay for the business. And without that cash, Cadbury’s hopes of pulling off a big acquisition of its own looked forlorn. The management did not completely abandon hope of selling the US drinks brands, but they started planning to separate confectionery and drinks into two companies and then to list the drinks business on the US stock market, issuing existing investors with shares in the newly formed Dr Pepper Snapple Group. As the credit crunch intensified and it became clear that a sale was impossible, the demerger went ahead in mid-2008. Cadbury dropped “Schweppes” from its name, and told investors it would “flourish” as an independent company – and thereby the world’s leading pure-play confectionery group. But its hold on that title was short-lived. In April 2008, just as shares in the new drinks company were to start trading in New York, Mars announced that it had agreed to buy Wrigley for £11.5bn ($23bn). Cadbury had been eclipsed. At Kraft’s headquarters in Illinois, Irene Rosenfeld was watching developments in the confectionery world with keen interest.

When Rosenfeld became chief executive of Kraft in June 2006, she immediately began trying to boost the company’s sluggish growth with a series of disposals and acquisitions. She sold Post Cereals, as Peltz had urged, and bought the LU biscuit brand from France’s Danone. She then turned her attention to confectionery. Kraft had been interested in Cadbury’s sweets brands for some time but as long as the UK company owned soft drinks as well, it was too big and unwieldy for Kraft to consider buying. Now, in 2008, things were changing. Although the demerger had fuelled press speculation that Cadbury had made itself a takeover target – because it was now a nice, simple business ripe for sale – its executives were too busy getting their house in order to worry much about potential suitors. In July 2008, Carr had replaced Sunderland as Cadbury’s chairman, and was pushing management to meet a tough new set of financial goals, including lifting profit margins into the “mid teens” by 2011 from around 10 per cent in 2007.

The company was also undergoing extensive restructuring, closing factories and cutting jobs, as well as moving out of its headquarters in Berkeley Square in 2008 to cheaper office space near Heathrow. All the while, Peltz remained on the scene. He kept up the pressure on Cadbury, demanding that Colin Day, finance director of Reckitt Benckiser, a high-performing British household products company, be invited to join the board (Day became a board member in December 2008). Carr, meanwhile, was under pressure to prove himself at Cadbury. A well-known businessman with a reputation as a tough negotiator, Carr had helped to build the engineering group Williams Holdings into a conglomerate specialising in fire protection and security, with a series of deals during the 1980s and 1990s, and then broke it up in 2000. But his reputation was coming under pressure due to difficulties in his job at pub operator Mitchells & Butlers, the company where he had been chairman since 2003.

M&B had lost hundreds of millions of pounds on hedges related to property investments, its finance director had left, and some investors were calling for a deeper boardroom overhaul. (Carr stepped down as chairman of M&B in mid-2008.) As Carr and Stitzer worked on improving Cadbury’s financial performance, Rosenfeld spotted an opportunity. She left Carr a message on his mobile in late August 2009, requesting a meeting. When the two met in central London on August 28, she made an unexpected proposal: Kraft wanted to buy Cadbury and was prepared to offer around £10.2bn or 745p a share in cash and stock – 31 per cent more than Cadbury’s share price a few days earlier. Carr rejected the offer without consulting Cadbury shareholders because he thought it was too low to take seriously. Ten days later, Rosenfeld went public with her proposal. Peltz, who still owned shares in Cadbury, didn’t know that Kraft was planning on making a bid for Cadbury, but he was not unhappy when he heard about it.

To force Kraft’s hand – because Rosenfeld’s proposal did not constitute a formal offer for Cadbury – the British company’s management asked the Takeover Panel to issue a “put up or shut up ruling”. Kraft “put up”, going direct to Cadbury’s shareholders with a formal offer, and in effect turning its negotiations with Cadbury into a hostile bid. As the 60-day timetable that governs takeovers in the UK got under way, Carr led an independence campaign for Cadbury, telling shareholders not to let Kraft “steal” their company and urging them to reject this offer from a conglomerate with an “unappealing” business model. He claimed Cadbury could deliver more value for shareholders if it stayed independent. Carr refused to pander to nationalistic sentiments in his takeover defence, maintaining that he was committed to shareholder value. But the potential loss of one of Britain’s most famous brands to an American predator sparked concern in political circles, with business secretary Peter Mandelson warning Kraft in December that it would face opposition from the government as well as the local population if it intended to make “a fast buck”. But the government did not take any action to prevent the bid, or secure commitments from Kraft to protect British factories or jobs.

As the bid proceeded, increasing numbers of Cadbury’s shares changed hands, as traditional investors sold and hedge funds bought them in order to take bets on whether Kraft would succeed. At times during the takeover process, it looked as if Cadbury had a real chance of seeing off Kraft. Its share price hovered around 800p – well above the value of Kraft’s initial offer – while Rosenfeld was criticised by her largest shareholder, billionaire investor Warren Buffett . Buffett made a public statement suggesting Kraft was using too many of its undervalued shares to buy Cadbury (Kraft’s initial offer was 60 per cent stock and 40 per cent cash) and that he wouldn’t vote in favour of Kraft’s proposal. He wasn’t against the idea of Kraft buying Cadbury, he just didn’t like the way Rosenfeld was going about it. But when Kraft eventually raised its offer to 850p in late January 2010, and switched the stock-cash ratio it was offering to 40 per cent stock and 60 per cent cash, Cadbury’s board did an about turn and agreed to recommend the offer to its shareholders.

So it was, that in the early hours of January 19 2010, Cadbury’s 186 years of independence came to an end. When Cadbury employees woke that morning to newspaper headlines announcing the impending sale of their employer, many were surprised and angry. Some descendants of Cadbury’s founders were, too. They claimed that hedge funds and other short-term investors – which owned close to one-third of the company’s stock as the bid battle drew to a close, up from just 5 per cent before Kraft went public with its offer in September 2009 – had sold Cadbury out. Institutional investors, meanwhile, were concerned that Cadbury had given in too easily. Cadbury’s second-largest shareholder, Legal & General , issued a statement saying the final price did not “fully reflect the long-term value of the company” and that it was “disappointed” management had recommended the offer for an “iconic and unique British company”. Some bankers involved in advising prospective counter-bidders for Cadbury claimed Cadbury’s board made no serious attempt to get an auction going for the company.

Hershey and the family-run Italian group Ferrero seriously considered teaming up to try and trump Kraft’s offer, although they never came forward with a formal bid of their own. Akeel Sachak, global head of consumer banking at Rothschild and Ferrero’s financial adviser, says: “There is no doubt in my mind that Ferrero had the appetite and capacity to deliver with Hershey an offer that would have brought more value to Cadbury than Kraft’s offer. But they were defeated by the vagaries of UK public bid rules and the decision-making tempo of a deeply private family [the Ferrero owners] unfamiliar with public mergers and acquisitions.” Carr, for his part, points out that Ferrero and Hershey never put a serious counter-offer on the table, and argues that he obtained the best price possible for Cadbury in the circumstances. He believes that hedge funds would have sold their shares to Kraft at 830p and that only by negotiating with Rosenfeld had the company got as much as 850p. “Independence as an option had gone,” he says.

“The cause was lost … the decision then was to negotiate for what I and the board felt was the recommendable price.” He claims the company’s Achilles heel was the large proportion of hedge funds on its shareholder register, as well as a historic lack of interest from UK institutions in the stock (in September 2009, UK institutions owned around 28 per cent of Cadbury while US institutions – less worried than their British counterparts about Cadbury falling to an American rival – owned nearly half of the stock). “The seeds of destruction for this company lay in its [shareholder] register,” Carr says. “If you’ve only got 28 per cent long domestic funds owning this company, then you know that in a bid the rest are likely to sell.” Carr says British regulators should consider changes to the country’s takeover rules to lift the acceptance threshold to 60 per cent (from 50 per cent today) so that long-term shareholders may have a larger sway in a bid situation. Sunderland is of a similar opinion. “I am a free trader but [the Cadbury takeover] has made me think deeply about this issue,” he says.

“The Takeover Code was written at a time when the ownership model was very different and when a hostile bid didn’t automatically land one-third of the register in the hands of arbitrageurs ... we need to think about making the British market a little less open, a little less permissive.” Still, neither government nor Britain’s opposition Conservative party has yet set out formal proposals to change the takeover rules. It is not yet certain whether Cadbury will prove to be some kind of tipping point following a long line of foreign takeovers of British companies, including steel group Corus, airports operator BAA and chemicals group ICI. Meanwhile, hedge funds take umbrage at the idea that they are to blame for Cadbury’s sale. “We’re kind of an easy target,” says one US-based hedge fund manager who bought shares in Cadbury during the takeover bid, pointing out that institutional investors also decided to sell their shares to Kraft. “Institutions aren’t in the business of losing money either.” Other investors agree that Cadbury’s takeover is not the fault of hedge funds.

David Herro, chief investment officer at US group Harris Associates, says: “The reason Cadbury was sold was that it was under-managed … Good, well-run companies don’t just get taken out like that.” Investors say that while Cadbury’s management was good at making deals, it was less skilled at running the business day to day. “There’s a difference between strategic management and operational management,” says one former Cadbury investor based in the US, noting that the company seemed constantly to be taking charges for restructuring. “They were good at the former and not at the latter.” Some say that if Cadbury had been better managed and more profitable – like Reckitt Benckiser, for instance – its stock price would have been higher, and it might have been too expensive for Kraft. People close to Kraft say the US food group would probably not have been able to afford 900p a share. Investors add that over the years Cadbury had disappointed its shareholders too often, so that even when its business started improving in 2008 and 2009, institutions were wary about placing much faith in its management. As a result, they were reluctant to buy the stock.

“Investors have long memories,” says one fund manager. “They just couldn’t think that Cadbury was changing so they were unwilling to believe what the management team was saying.” Investors were particularly aggrieved by the company’s failure to tell them that it was thinking of selling its US drinks arm in 2006. Julian Hardwick, a financial analyst at the Royal Bank of Scotland, says: “A lot of people did feel that Cadbury had not communicated the way their thinking had evolved ... that damaged management credibility.” Hardwick agrees that if Cadbury had found a way to improve its profits earlier, it would have been less vulnerable to a takeover. “The tragedy was that it all happened too late,” he says. “In an ideal world they would have made faster progress ... and they would have commanded an earnings multiple that would have made them more impregnable to someone like Kraft.” Few people in the UK are happy that Cadbury ended up being sold to Kraft. Even Peltz believes there is a risk the company’s much-loved brands will not get the attention they deserve in a big food company that sells everything from instant coffee to hot dogs.

“That’s a justifiable concern,” he says, adding that Kraft will however be successful if it makes confectionery and snacks the most important part of its business. “That’s what they will be judged on.” Stitzer, who resigned as chief executive a few days after Kraft sealed its deal, says: “I spent 27 years of my life at this company, I absolutely love what it stands for and what it has done ... the whole idea that ‘doing good is good for business’, the intersection of principled capitalism, and commercial and financial performance, is what drives people at this company. They actually believe that not only are they great confectionery marketers or sellers or manufacturers but that it means something because the Cadbury Cocoa Partnership is investing in underdeveloped farming areas or because the chocolates have been certified by Fairtrade.” Carr says he feels a sense of sadness for “the loss of a business that was sound and the independence of something that was good”.

“If the company had done a number of things earlier, then you wouldn’t have had the criticism from activist investors and you may not have had the relative disinterest from UK institutions in owning Cadbury.” Still, he maintains there is no point being nostalgic, despite Britain’s loss of household brands such as Roses chocolates and Bournville cocoa. “It hadn’t been a family company for 50 years, it hadn’t had a member of the family working in it for a decade. Fifty per cent of the company was purchased from an American drug company – it simply wasn’t the business people believed it to be.” Jenny Wiggins’ last piece for the magazine was about retrenchment at Starbucks. Read it at . She was the FT’s consumer industries correspondent from 2005 to 2010. Sample the FT’s top stories for a week You select the topic, we deliver the news. Select topic Cadbury accepts $21.8B takeover by Kraft - CNN.com Cadbury accepts $21.8B takeover by Kraft The 200-year-old British chocolate maker may soon be owned by U.S. food giant Kraft. STORY HIGHLIGHTS British chocolate maker Cadbury accepts buyout offer from U.S.

food giant Kraft Kraft offer for Cadbury is 840 pence per share, valuing Cadbury at £21.8 billion Agreed cash-and-stock offer ends five months of hostile relations Combined Kraft/Cadbury will be one of world's biggest confectionery companies RELATED TOPICS Board of Cadbury plc London, England (CNN) -- The board of British chocolate maker Cadbury accepted a buyout offer from American food giant Kraft Tuesday, a deal that would end the nearly 200-year-old independence of the beloved British brand. The board has agreed to recommend the offer to Cadbury shareholders, who have until February 2 to decide -- but they are expected to approve it. Kraft's offer Tuesday is its biggest one yet for the maker of Creme Eggs and Dairy Milk chocolate bars. It values Cadbury at £13.3 billion ($21.8 billion), or £8.40 ($13.77) per share. In addition, Cadbury shareholders will be entitled to receive 10 pence (16 cents) per Cadbury share.

"We believe the offer represents good value for Cadbury shareholders and are pleased with the commitment that Kraft Foods has made to our heritage, values, and people throughout the world," Cadbury Chairman Roger Carr said in a statement. He said Cadbury would work with Kraft to ensure the growth of the business for customers and employees. "We have great respect for Cadbury's brands, heritage, and people," said Kraft Chairwoman and Chief Executive Irene Rosenfeld. "We believe they will thrive as part of Kraft Foods." Will takeover affect Cadbury's taste? Cadbury had previously rejected two hostile takeover bids by Kraft because Carr said they did not value the company high enough. Illinois-based Kraft earlier this month sold its North American frozen pizza business to Nestle to finance a fresh bid for Cadbury. The January 5 sale helped Kraft boost the cash element of its offer, which would give Cadbury shareholders cash in addition to Kraft shares. There had been rumors that Swiss firm Nestle, which has a chocolate and confectionery unit, would make its own offer for Cadbury. But Nestle squelched those rumors when it bought Kraft's frozen pizza business in the United States and Canada for $3.7 billion. U.S.

chocolate maker Hershey also had reportedly been considering a $17.9 billion bid for Cadbury. Cadbury is a beloved brand in Britain, producing chocolate products that have become a cultural fixture. Its Dairy Milk and Bournville brands have been around for more than 100 years, and its Milk Tray and Roses samplers -- which are still sold today -- were some of the first to be marketed as an everyday purchase. John Cadbury established his shop in Birmingham, England, in 1824, selling drinking chocolate alongside coffee and tea. Cadbury, a Quaker, was trying to give people an alternative to alcohol, which he thought destroyed lives, according to the company. Cadbury: From grocery store to global giant The company now employs around 45,000 people in 60 countries, including around 5,700 staff at eight manufacturing sites in the UK and Ireland, Kraft's roots go back to 1903, when J.L. Kraft began selling cheese from his horse-drawn wagon in Chicago, Illinois.

Today the company owns products from Oreo Cookies and Jell-O gelatin to Philadelphia Cream Cheese and Miracle Whip salad dressing, though it may be most famous for its Macaroni & Cheese instant dinner and Velveeta processed cheese products. Kraft's takeover of Cadbury has also been criticized by British trade unions who urged the UK government and the EU to block the bid. Unite, the UK's largest union said a merger will destabilize the company and hit future returns to shareholders. Outside Cadbury's plant in the Birmingham suburb of Bourneville on Tuesday some workers expressed their fears about possible job losses. One man told the Press Association: "There are a lot of worried people inside that building." The employee, who asked not to be named, added: "Nobody really knows what is going on or what this might mean in terms of job losses, but inside that factory there are a lot of people who are very, very worried about the future -- the future of the company and their own future, their jobs and their families.

"It is not a good atmosphere here today." Share this on: Nervous Cadbury settles in with a new owner as Kraft splits itself in two | Business | The Guardian Nervous Cadbury settles in with a new owner as Kraft splits itself in two Unions fear for jobs as UK company becomes part of demerged entity Mondelez After becoming part of Kraft Foods after a bitterly contested takeover in 2010, Cadbury is now part of an all-new European snack foods company. Photograph: David Sillitoe Saturday 3 November 2012 20.04 EDT First published on Saturday 3 November 2012 20.04 EDT Close This article is 4 years old Lörrach, on the edge of the Black Forest, may be 700 miles away from Cadbury's historic home of Bournville, but it too can lay claim to a chocolate-making tradition dating back more than 100 years. The picture-postcard town is home to Milka, Germany's favourite chocolate bar; the factory gates are close enough to the Alps to receive milk from the herds grazing in the mountain meadows.

Here too, a purple corporate livery is much in evidence – although Milka's art-nouveau lilac is of a distinctly lighter shade than Cadbury's now trademarked Pantone 2685C . And both are now outposts of the sprawling Kraft global empire. Plant manager Peter Jungbeck says: "Lörrach is like Bournville. They have been making chocolate for 170 years and we have been doing it for 130. The people are very proud that a brand like Milka is in their city." With 3m bars rolling off its production lines each day, Milka is the biggest local employer. Like Cadbury , it was once part of a family-run business, started by Swiss chocolatier Philippe Suchard, but it became part of Kraft following the 1990 takeover of Jacobs Suchard and is now one of its biggest brands, with annual sales of more than $1bn and spinoffs such as biscuits, cheese spread and hot chocolate. The Suchard name, in its classic gold embossed lettering, disappeared from the packets long ago.

Cadbury was swallowed up by Kraft in 2010 after one of the hardest-fought takeovers in recent memory – but with the ink barely dry on the new stationery, it was all change again last month as the US group went ahead with a surprise demerger that saw more than 100 of its snack brands, including Cadbury, Milka, Toblerone and Oreo, spun off under the newly created banner of Mondelez International. The shakeup, unions fear, could spell change for 6,500 staff in the UK and Ireland, not least because factory workers are no longer protected by a pledge of no compulsory redundancies. The promise, which expired in March, was extracted from Kraft after it was called to account by parliament for reneging on the closure of the Cadbury plant at Somerdale near Bristol.

Jennie Formby, national officer for food and drink industries at the union Unite, is concerned after 200 positions were cut at the end of last year: "We never thought sites would close straight away, but there are certainly vulnerabilities – not just in the UK and Ireland but in the whole of Europe." At the Light Cube, a glass office block in Zurich, Mondelez's European head, Tim Cofer, met the press for the first time last week and waxed enthusiastic about the outlook for the month-old company – which, despite the split, is still the world's biggest chocolate and biscuit manufacturer with annual sales of $36bn. What was previously Kraft's European base is emblazoned with the company's garish new logo – also purple – and Cofer, a high-flier with the ear of group chief executive Irene Rosenfeld, insists the logic for the split was "compelling", creating two companies with different specialities and geographical footprints.

But with 59 factories in Europe, the business is a jigsaw of assets amassed on an acquisition trail that has included Jacobs Suchard, Danone's biscuit arm Lefèvre-Utile (LU) – maker of classic French biscuits such as Petit Beurre – and most recently Cadbury. Cofer admits: "There will be change over the coming years as we look for the most efficient network in the industry to support this snacking company. Our portfolio is too complicated, we have too many product lines and can unlock benefits from simplifying our portfolio." With nearly half its sales rung up in emerging markets, Cofer says Mondelez offers investors "exposure to a higher growth profile", and with eyes firmly on the demerger, he is eager to drive the corporate message home: "This is not the old Kraft Foods – this is Mondelez International and we are a global company." The European business is also a big piece of the Mondelez pie, accounting for nearly 40% of sales, whereas North America, where it retains its listing, contributes less than a fifth of turnover. The opposite is true of the other half of the demerger, which will retain its original name.

Kraft, famously described by one Cadbury descendant as that "plastic cheese company", will now account for turnover of around $19bn, having been left with a larder full of US grocery brands such as Miracle Whip, Jell-O and Kool-Aid. From Kraft's standpoint the £11bn Cadbury deal was a good one, says Cofer, who led the integration: "We are on track if not ahead of plan on everything we had hoped for. We created a business that grew faster than its separate parts." Costs as a percentage of sales decreased from 17.7% in 2009 to 14.2% in 2011 as savings made from bashing the two companies together were realised. Despite reports of mass defections, Cofer insists the group "retained key talent": former Cadbury executives Ruslan Kinebas and Andrew Gibson sit on the European leadership team while former UK managing director Trevor Bond is Cofer's counterpart in central and eastern Europe. "We have legacy Cadbury folks leading categories, geographies and functions," he says, before stressing that it's not all about Cadbury. "The same would apply for LU.

On the sixth floor we have a fantastic collection of legacy LU folks. We are investing to bring together three legacy companies: Kraft, Cadbury and LU." But with the tax affairs of multinationals coming under increasing scrutiny, Kraft faced criticism when it shifted ownership of some of the UK companies to a Swiss holding company. There are "many reasons" to choose a Swiss base other than tax, insists Cofer, who says the company complies with "all applicable tax legislation" in the UK. "Mondelez International pays corporation tax based on the laws of the jurisdictions in which it operates," he says, adding that Kraft has had a Swiss base for more than 50 years. "It's not a new 'hey let's go to Switzerland'. From a talent attraction standpoint, it's a great place to live. It's no hardship to live in Zurich." If British consumers are perturbed about the fate of Cadbury under its latest new ownership, they are not showing it. The latest Nielsen data put the brand's UK market share at 29%, up 0.2% on the previous year. "Our market share in the UK with Cadbury Dairy Milk has hit a record high," says Cofer.

"In the end the British customer is voting with her pounds and voting quite favourably."

Question: Which US company has recently taken over Cadbury's?
Answer: Kraft