Takeover Panel censures Kraft over Cadbury bid

By Oliver Nieburg

- Last updated on GMT

Related tags: Peter mandelson, Kraft

Kraft - Cadbury
Kraft - Cadbury
The UK Takeover Panel this week issued a rare public censure of Kraft after the company was held in breach of the executive body’s code by going back on promises relating to the closure of a Cadbury chocolate factory in Somerdale.

The regulator’s rebuke, which adds to the mass criticism of Kraft over its £11.7bn takeover of Cadbury in February, came a day before reports that five senior executives are to leave the multinational firm.

The reproof builds upon earlier condemnation from the UK Parliament’s Business, Innovation and Skills Committee, which accused Kraft of acting “irresponsibly”​ in relation to the closure of the Somerdale factory in April.

Rare rebuke

The censure, which is the first to be issued in almost three years, also prompted Peter Kiernan – a Lazard banker who had advised Kraft on the takeover deal – to withdraw his candidacy as the next director general of the Takeover Panel.

However, the supervisory body said it will be “business as usual,” ​for Kraft, which will not face fines or other penalties as it is outside the panel’s competences to issue sanctions.

Kraft has accepted the panel’s decision and will not appeal. Marc Firestone, Kraft’s general counsel, told The Times: “Even though we never made a promise or a commitment to keep the facility open, we recognise that our ‘statement of belief’ created uncertainty among employees.”

Prelude to the reprimand

Prior to Kraft’s takeover, Cadbury announced the phased closure of the Somerdale site in October 2007 and began to invest over £100m in new facilities in Poland with plans to transfer its operations.

The Panel said Kraft only knew about the transfer from Somerdale to the new site in Poland based upon information available in the public domain and a meeting with Cadbury in January when the issue was briefly touched upon.

News of the relocation was covered by major UK media outlets, such as the BBC, the Guardian and the Daily Mail in 2007 following Cadbury’s announcement to close the facility.

Kraft gave assurances that the Somerdale facility would be continue to operate but one week after gaining control of Cadbury it closed the Somerdale site in light of alleged fresh knowledge of the Polish relocation.

The executive panel found this action was in breach of Rule 19.1 of the Takeover Panel code which provides that information should be presented accurately and fairly during the course of a takeover.

Deterrent

The UK Takeover Panel’s spokesperson said that its reprimands send an effective reminder to the companies to maintain commercial integrity, and will serve as a deterrent to companies attempting to secure a takeover bid based upon false promises.

In March, former Business Secretary Lord Mandelson called for the code relating to foreign takeovers to be revised to “throw grit into the system”.​ The Takeover Panel said it was not its place to comment on foreign takeovers of British companies but added: “If the world at large thinks changes should be made – we will do that.”

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