Kraft behaved badly when it bought Cadbury, says Vince Cable

Jul 21 2010 by Jonathan Walker, Birmingham Post

Ministers are preparing tough new laws making it harder for foreign firms to buy British companies, following Kraft’s takeover of Cadbury.

Business Secretary Vince Cable said US food giant Kraft “behaved badly” when it bought the Birmingham-based firm in February.

And he said he was looking at changes to the law to make takeovers more difficult.

Dr Cable said possible changes included limiting the fees that bankers could receive from takeover bids, making them less likely to fund buyers such as Kraft when they needed to borrow money to pay for takeovers.

Other options included preventing hedge funds from buying shares in a business which had been targeted by a hostile takeover bid, and immediately voting in favour of the sale.

Some MPs claimed city traders bought shares in Cadbury just to make a quick profit by voting for the sale to Kraft.

And Dr Cable also suggested he could change the law so that the government was able to rule a sale was not in the national interest.

At the moment, Ministers are only able to block takeover bids in very specific and limited circumstances, such as when the country’s national security might be affected.

The Business Secretary was giving evidence to the Commons Business, Innovation and Skills Committee, which has been highly critical of the takeover bid.

MPs particularly attacked Kraft’s decision to proceed with the closure of Cadbury’s Somerdale plant near Bristol, which had been planned by the previous management, despite the American firm’s promise to keep the plant open.

Dr Cable said: “Your criticisms are shared by us. Entirely valid. They did behave badly and there were some very negative consequences.”

He said the Government was monitoring Kraft’s management of Cadbury and would produce a report soon.

“We are monitoring it, and we will have the document for you very soon.”

He said the Takeover Panel, a Government body which oversees takeovers, was looking into potential changes to the law and he would make a decision once it had reported its findings.

Dr Cable said: “The general approach would be that there is an argument for reducing the incentives to have takeovers, and we are looking at the procedures and fees that make that possible.

“There is an argument for looking at the issue of short-termism.”