The UK Parliament’s Business, Innovation and Skills Committee, in its report on the takeover published today, also expressed concern that the takeover of Cadbury by the US food giant was ultimately decided by institutional investors motivated by short-term profits rather than those investors who had the company’s long-term interests at heart.
The politicians found that the takeover was particularly marred by the controversy over Kraft’s statements regarding the future of Cadbury’s Somerdale factory which was earmarked for closure.
They claim that Kraft had been either incompetent or cynical by promising to keep the plant open during its pursuit of the Dairy Milk maker and then doing the reverse one week after gaining control of Cadbury:
“We conclude that Kraft acted both irresponsibly and unwisely in making its original statement that it believed that it could keep the Somerdale factory open.”
And the US food group, continued the MPs, will now have to invest significant time and effort to restore its reputation with the UK public.
The Committee conceded that the evidence it heard from Kraft executives such as Marc Firestone, did, however, give some welcome clarity on its intentions for brand management, the workforce and Cadbury’s philanthropic activities.
However, it stressed that if the US food group is serious about restoring its reputation in the UK it is vital that it delivers on all of these undertakings. “These commitments which have been personally endorsed in writing to us by Irene Rosenfeld—are now in the public domain, and therefore will be subject to close scrutiny over the next few years.”
The politicians also argue that the Kraft takeover of Cadbury is likely to shape future public policy towards takeovers and corporate governance in the UK, and the Committee said that it welcome the UK government’s focus on the issue of ‘short-termism’ in decision-making on the future ownership of UK companies.
Acquisitons in dock
The MPs also said they supported the moves by the Takeover Panel to consider a review of the rules and legislation governing takeovers in the UK.
The proposals under review in regard to amending how acquisitions are carried out in the UK include options such as raising the voting threshold for securing a change of ownership to two-thirds; lowering the requirement of disclosure of share ownership during a bid from 1 to 0.5 per cent so firms can see who is building stakes on the register.
Other changes suggested include requiring bidders to set out publicly how they intend to finance their bids not just on day one, but over the long term, and their plans for the acquired company, including details of how they intend to make cost savings.
“We encourage our successor Committee to take up where we have left off and conduct a detailed inquiry into these important issues and into the role of shareholders and managers of companies more generally. It is time to reconsider many aspects of corporate governance,” said the MPs.
You can read the UK parliamentary commitee report here