Kraft faces investigation

Kraft the subject of interest

Kraft Foods has found itself the subject of an investigation by UK regulators over whether it misled employees and investigators during its battle to take over Cadbury.

The Panel on Takeovers and Mergers is looking into comments Kraft executives made during the contentious takeover battle about Cadbury's Somerdale candy factory in Keynsham. Beginning with its initial takeover letter, Kraft officials repeatedly said they believed the factory could be kept open. It was the opposite to Cadbury, which had said it would close the plant and move Somerdale's 500 jobs to Poland, The Wall Street Journal reported.

Shortly after it was confirmed that Kraft was buying Cadbury, it was announced that Kraft would close the Somerdale factory, as Cadbury had planned, by 2011.

This week, the panel wrote to Jacob Rees-Mogg, the Conservative Party candidate for North East Somerset, where the Sommerdale factory is, to say that it is looking at the accusations.

Mr. Rees-Mogg had previously written to the panel that Kraft, had backtracked on the closure, saying it broke rules that call for bidders to "prepare statements with the highest degree of care and accuracy."

A spokesman for Kraft said in a statement, "Throughout the transaction, it has never been our policy to comment on the UK takeover panel. Any questions about the panel therefore should be addressed to the panel itself."

"Shameful"

Mr. Rees-Mogg has described Kraft's behavior as "shameful."

In an email he said, "It gave people in Keynsham false hope in its prospectus which was either careless or deliberately misleading."

It is unclear what steps the panel could take to punish Kraft should it find the company violated the takeover code.

The closure of the Somerdale plant has angered many, including UK Business Secretary Peter Mandelson, who has accused Kraft Chief Executive Irene Rosenfeld of failing to inform him in advance about plans to shut the factory, while Conservative counterpart Ken Clarke complained he had been reassured only days earlier that Somerdale would be kept open.

Later this month Kraft executives will be called to give evidence in front of a parliamentary committee that is holding hearings on the takeover.

"Kraft gave a number of undertakings before its takeover of Cadbury, we will be testing those undertakings," the committee's chairman, Peter Luff, said in a statement.

The deal has already prompted the panel, an independent regulatory body, to launch a public consultation on whether to change takeover rules and Lord Mandelson has called for a wide-ranging review of UK takeover law to limit the influence of short term investors on takeovers.

Jodie Humphries

Jodie Humphries graduated from Bath Spa University with a BA Hons in Creative Writing in 2008. She has worked for GDS Publishing for the digital group since July 2009. She has previous experience with writing for the web, running her own website since April 2007.

Related News:

Kraft deal with Cadbury finalised |Cadbury vs Kraft |Cadbury sale agreed |Kraft backs out of promise

Like this article? Get the RSS feed: