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Introduction
The acquisition of Cadbury Company which was a leading chocolatier by the Kraft Company was surrounded by controversies (Wright 2010, 3). The first initial bid by Kraft was 19.5 billion pounds and was expected to generate forty confectionary brands from the combined portfolio and each confectionary was expected to have an annual sale of one hundred pounds resulting to the leading producer of confectionary in the world (Yoder 2010, 5). Eventually the deal was completed after Kraft acquired Cadbury at an accepted bid of 11.7 billion pounds in order to own 72 percent of Cadbury shares (Davies & Williams 2009).
Criticism
The deal had a lot of deficiencies in that; Kraft just needed 50% shares plus one in order to take control of Cadbury (Sealy and Worthington 2007). The acquisition received criticism from the public and also from Peter Mandelson who is the United Kingdom business secretary when he met with Irene Rosenfeld (Kraft Chief Executive officer). According to Peter Mandelson, the acquisition would result to loss of 4,500 workers who worked for Cadbury. Kraft chief executive officer, Rosenfeld did not promise to offer any jobs for the employees but instead said through media that “the objective of the deal was to increase the sale of Cadbury and Kraft products” (Davies & Williams 2009).
According to Kraft’s CEO, “the top Leaders of Cadbury were to directly go but the Cadbury CEO Todd Stitzer and Chief Financial Officer Andrew Bonfield would help Kraft integrate Cadbury into the Northfield, Illinois-based food maker, but would step out of the direct chain of command” (Yoder 2010, 5). From a human resource management perspective the deal would result to negative impacts to the employment sector whereby the number of the unemployed people would increase (Deakin & Gillian 2004). This was evidenced by the large numbers of Cadbury employees who gathered in central London to urge the government to protect their jobs after the deal was made (Jones & Sufrin 2005).
According to analysts, “Kraft would delist the products that were manufactured by the combination of the two companies such as Cadbury’s Dairy Milk chocolate, Halls cough drops and Trident gum with Kraft’s once it acquired 75 percent of Cadbury shares” (Garfield 2010, 8). This would result to the total stop of the manufacture of the Cadbury products and it would even be delisted from the London Stock Exchange. The impact of this move by Kraft would result to the disappearance of Cadbury products in the market and as a result of this; employees and business people who traded these products would lose a lot.
Cadbury workforce union was left in suspense after Cadbury HR Director promised the union that Kraft would honuor the terms and the conditions and any previous undertaking by Cadbury (Lazarus 2009). The Cadbury HR Director further promised the employees that there would be a severance package for them and also a job centre would be created for them. This was not certain to happen since the acquisition deal did not have clear guidelines on the measures and the safety of the Cadbury employees. Rosenfeld stated that “UK will be the major beneficiaries in term of jobs with the current plan” (Whish 2003).
However, the request from the Cadbury staff to be offered with the guarantees that the company site would not be shut, their pension scheme would be obeyed and the terms and conditions were to be safe was not offered. The result of all this deal was lack of confidence in Kraft by the Cadbury employees even though Rosenfeld continuously promised an expansion in market and growth of the business (Pechenik 2009, 7).
References
Davies, J. & Williams, B. 2009. Mergers, acquisition and takeovers: The takeover of Cadbury by Kraft. London: The Stationary Office Limited.
Deakin, S. & Gillian, M. 2004. Labour Law. Washington: Hart Publishing.
Garfield, E 2010. Unions square up to Kraft to demand pay rise for Cadbury workers. Guardian, P.8.
Jones, A. & Sufrin, B. 2005. EC Competition Law: Text, Cases and Materials Oxford: Oxford University Press.
Lazarus, L. 2009. Understanding the Instant Impact of the Kraft-Cadbury Acquisition Negotiations on Hostile Takeover Bids and Other Acquisition Strategies (ExecSense Webinars). London: Oxford University Press.
Pechenik, J. 2009. Cadbury adopts Fair-trade source. The Independent, P.7.
Sealy, L. & Worthington, S. 2007. Cases and Materials in Company law, 8th Ed. Washington: Oxford University Press.
Whish, R. 2003. Competition Law, 5th Ed. Lexis: Nexis Butterworths.
Wright, M. 2010. Kraft, Cadbury, acquisition bid. Associated Press, P.3.
Yoder, S. 2010.Triple blow for Cadbury staff from Kraft deal. The Daily Telegraph, P.5.
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