MERGER mania is upon us again with news that Hershey of the US has joined the bidding for Cadbury, the British chocolate maker, with a 17bn offer that trumps the 16bn hostile bid from Kraft on the table for the past two months.
It’s all very exciting, and just what the markets need to rebuild investor confidence. But there is more to this than who gains control of one of the world’s largest chocolate companies.
For millions of people around the world, the squiggly Cadbury logo stands for pleasure and indulgence. The sentimental component of the Cadbury brand is enormous.
Add to that the fact that Cadbury is, in Britain anyway, a byword in corporate philanthropy, and you have a powerful mix. Its founder, the Quaker George Cadbury, cared for his workers, and built them a town, Bournville, on the outskirts of Birmingham, where they still live in a kind of English village Disneyland of pretty houses, green lawns and pillar boxes .
Cadbury was not alone; the Quakers were the founders of the British chocolate business in Victorian times: names such as Rowntree, Fry’s and Terry are bywords in the worlds of confectionery and philanthropy . But Cadbury always stood ahead of the field. Moreover, it is one of the few still standing. Most of the rest have been taken over, their brand names wiped out by market strategists in global conglomerates such as Nestle and Kraft.
Small surprise, therefore, that the bids for Cadbury have rung alarm bells. It is not just the fear that some foreign conglomerate will march in and shut down Bournville, sending thousands of jobs to China , or even that much-loved confectionery brands will be altered. It is a deeply rooted apprehension that a part of England, a part of millions of lives, will be lost.
Kraft and Hershey have done their best to allay these fears, promising to keep production in the UK and — in Kraft’s case — even to reverse a previous closure decision by Cadbury itself. But people in York, where the likes of Terry and Rowntree were based, remember precisely the same promises being made by bidders there, only to see them broken soon after.
It is a question now of whether the sentimental war over Cadbury will have any effect on the cash war. But that will not happen. There is nothing in Britain’s takeover and merger rules, or its competition policy, that gives the government the power to stop a merger on sentimental or even patriotic grounds. If anything, the opposite: the UK has been wide open to foreign acquisition for decades, specially compared to countries which protect their own like France, and has benefited from the investment that it brings.
Moreover, Cadbury is not quite the British through-and-through company that it seems. More than three quarters of its sales are abroad, and its best growth prospects lie in far-off lands like China. So while it may tend the lawns of Bournville with care, its eyes are somewhere quite different.
The sentiment may, however, aid Cadbury in other ways, by pushing up the price. The strength of public feeling about the bid is about as powerful a demonstration of brand loyalty as any company could want, and any bidder for Cadbury would have to deliver that value to the shareholders it was buying out. Small surprise, therefore, that Kraft is being forced to up its offer, and faces stiff competition.
One would like to think that Cadbury was making a stand for homely pleasures and decent corporate values in an increasingly cut-throat world. But I fear that will not be the case. Cadbury will get gobbled up like a Crunchie bar, and an era in British business history will come to an end.
- Lascelles is senior fellow of the Centre for the Study of Financial Innovation, London, and a former banking editor of the Financial Times.