Kraft Debt Could Make Cadbury Next Manchester United
British confectionary makers Cadbury succumbed to the pressures of a takeover bid from American food giant Kraft yesterday as an £11.5 billion ($18.9 billion) deal was struck.
However, fears were raised as Kraft revealed that over half of the takeover bid would be financed by debt. As Kraft absorbs another iconic British brand, the company said the deal would cement the place of Kraft as a global leader in confectionary.
Chief executive of Kraft Foods, Irene Rosenfeld said: “We have great respect for Cadbury’s brands, heritage and people. We believe they will thrive as part of Kraft Foods,” reported the BBC.
The assertion that Cadbury’s will thrive under new ownership though is contentious to say the least. Despite reassurances from Cadbury chairman Roger Carr that the offer represented “good value” the deal was described as a “horror story” by Felicity Loudon, the great-great-granddaughter of Cadbury’s founder.
Part of the issue surrounding the takeover concerns why Cadbury needed to enter such a deal. Kraft arguably needed the strength of Cadbury’s brands more than Cadbury needed Kraft’s money. Indeed the fact that Kraft needed to double its corporate debt by financing the takeover with an additional £6.14 billion ($10 billion) of debt raised eyebrows.
Similar moves have been made with another British institution, Manchester United football club. The American owners, the Glazer family have built up mountains of debt for Britain’s biggest football club, ensuring success in the short term but ultimately causing serious financial headaches. Had United not sold star player Ronaldo last year for an astonishing £80 million, the club would failed to broken even for the year.
Whilst bigger might well be better for “corporate synergies” Cadbury also inherit a host of potential problems by becoming a part of the Kraft family. Lost jobs are an inevitable outcome of a restructure, the question remains as to how many British jobs will go.
Companies news posted by Tim Daffodil on Wednesday, January 20, 2010
