Anthony Hilton: No bare knuckles in Cadbury fight

The attempt by Kraft, the US processed food business, to take over Cadbury, the British chocolate maker, has been the only serious bit of merger and acquisitions activity for months and it is now moving towards its climax.

Anthony Hilton
Anthony Hilton

Kraft has to make its final offer by Monday (18 January) and then, in the absence of a counter bidder, shareholders will have a little under three weeks to decide whether or not to accept the bid. We are approaching the point where, in the words of one commentator, the shadow boxing stops and the bare-knuckle fight begins.

It would be comforting to believe that were true, but it would be a mistake to expect too much. Overblown rhetoric signifying little has been a hallmark of this tussle.

Kraft has failed to explain why it wants Cadbury, other than because it is there, and because the deal will boost earnings if Kraft succeeds in buying Cadbury on the cheap. It is an opportunist bid - one with no merit or logic, but a chance of making a quick buck.

Meanwhile, the Cadbury strategy has fallen uncomfortably between saying it wants to stay independent and dropping dark hints that Hershey or Nestle might be willing to pay more than Kraft.

The uncomfortable truth, of course, it that the board is not driven by what is good for Cadbury in the medium term; it is dominated by what is good for Cadbury shareholders in the short term. It would see it as a victory if it sold out at a high price.

So all this talk of bare-knuckled fights is actually just posturing and a thinly disguised ploy to obscure the fact that it is barely fighting at all.

A real bare-knuckled fight would tear into Kraft and expose its mediocre earnings record, its poor growth rates, its tired and outdated product range, the intellectual bankruptcy of its management thinking and its persistent failure in non-American markets.

That is what its PR should be doing. That is what a board committed to independence would do.

But that might mean it would successfully see off the bid, so shareholders would not get their money. And for the reasons just explained, that is not the strategy at all.

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