Any deal that involves a foreign takeover of a great British institution or brand will always be tinged with sadness.
But few have met with so much anger and opprobrium as the hostile takeover of Cadbury by Kraft. And this week’s news that Kraft will basically decouple Cadbury has quickly stirred over the coals.
While some of Kraft’s promises, and CEO Irene Rosenfeld’s utterances in response to government enquiries, inflamed the flames still further, a lot of the resentment to the takeover was sentimental, jingoistic even: if Cadbury had been sold 10 or even five years earlier, there could have been few compelling financial arguments for retaining a sprawling, old-fashioned and low-margin conglomerate; and, even as the business was turning itself round, with a new strategy under US-born CEO Todd Stitzer delivering stronger numbers, the rationale for independence was undermined as Rosenfeld upped Kraft’s bid, valuing the business at a reasonably (or excessively if you’re Warren Buffett) generous £11.5bn.
But this week’s news is a vindication of another important objection raised in Cadbury’s defence, which, far from being jingoistic, was fundamental. It argued that Kraft’s scale-based regional power play valued brawn over brain; whereas Cadbury’s global category focus would deliver better growth.
Precipitated, surely, by activist shareholder Nelson Peltz who took a big stake in late June (see p5) initial reaction among analysts is that decoupling the businesses makes sense and will finally unlock some value. But it’s a humiliating volte face for Rosenfeld. In theory, with her experience in savoury snacking at Frito-Lay, she is better qualified to run the new sweet snacking business.
Given the money wasted on an expensive acquisition and the haemorrhaging of so much talent in a reorganisation that now needs to be expensively picked apart again and rebuilt, she shouldn’t be given a choice.
Ex-Cadbury bosses blast Kraft over ‘sickening waste of money and talent’ (5 August 2011)
Kraft unveils dramatic plan to split in two (4 August 2011)