Future of Cadbury -

Along with other Birmingham Labour MPs I have been taking up the issue of the future of Cadbury in Parliament (read more here). Last night I joined Selly Oak MP Lynne Jones who had secured time in the House of Commons for a debate on Cadbury.

Cadbury: House of Commons, 26 January 2010

Lynne Jones (Birmingham, Selly Oak) (Lab): A week today, we will know whether Cadbury shareholders have succumbed to the offer from Kraft, worth 850p a share. There is still time for investors to look to the long-term value of the company, which is currently in good health, with no debts. In contrast, Kraft's debts will have gone from billion in 2006 to billion if it succeeds in taking over Cadbury. However, the signs that Cadbury will remain in British hands are not optimistic, given that more than a quarter of shareholders are now hedge funds, those Johnny-come-latelies who bought into the company only to make a fast buck.

Since coming to power in 1997, new Labour has fully embraced the Anglo-Saxon model of unfettered market capitalism, such that, as Lord Myners has acknowledged, it is easier to take over a company here than anywhere else in the world. So when the Business Secretary made his exhortation before Christmas, saying that Kraft would face huge opposition from the Government if it tried to make a quick buck out of Cadbury, he could not deliver on that commitment. I therefore want to use the opportunity of this debate to explore what lessons can be learned from the Cadbury debacle, to try to ensure that other British companies do not similarly fall prey to hostile takeovers that are in the interests of neither the company nor UK plc.

That is not to say that I want to argue that all takeovers are bad or that I want to return to devil-take-the-hindmost protectionism. Britain has greatly benefited from overseas investment by companies such as Toyota and Honda. I do not want to discourage such long-term investment, which has brought improved technological and management capabilities. My concern is for those British-owned companies that are well run and have good prospects for retaining high-value-added functions in the UK, creating jobs in research and innovation and jobs requiring high skills. The Government cannot pick winners, but they should create a framework in which such companies can prosper but not be so easily subject to predatory activity. We have learned over the credit crunch of the importance of the relationship between the enabling state and successful business. I hope that we have learned that Keynesian economics should not have been so casually abandoned.

People in Birmingham and the west midlands have been hard hit by the recession-the consequence of an over-reliance on financial services and the downgrading of the importance given to manufacturing. Even though Rover, LDV and HP Foods were struggling companies, their demise hit us hard. However, when we woke up last Tuesday morning and heard that the board of Cadbury was going to recommend that shareholders accept the Kraft offer, we were shocked and angry. Was it not only seven days previously that Cadbury had issued a revised document to shareholders urging them to reject a bid representing only 12 times historical earnings? Why was the last-minute higher offer, at just under 13 times historical earnings-still a derisory multiple compared with takeovers of comparable well-branded food businesses-suddenly deemed acceptable? Surely all the arguments about the importance of keeping Cadbury independent as a successful and profitable British company were as valid then as they were only a week earlier.

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