Anthony Hilton: Creating victory out of a defeat

It is a tribute to the hold that Cadbury has on the nation's affections - and the power of its brand - that the prospect of a takeover by Kraft, the US processed cheese manufacturer, continues to cause controversy.

Anthony Hilton
Anthony Hilton

There are two separate areas of argument. One is the philosophical issue about whether the UK benefits as much as we are led to believe from our willingness to sell all our best businesses to foreign competitors. The second is whether the price of the agreed takeover at 840p a share was, as Cadbury chairman Sir Roger Carr would have us believe, simply too good to refuse.

The first topic is not really a subject for this column; the second certainly is.

Before Cadbury's board accepted the 840p offer, the majority opinion in the stock market was that anything more than 800p would probably be acceptable.

The interesting question for those who make their living shaping public opinion is how that consensus emerges.

It is, in fact, where the PR consultant makes his or her money. One of the paradoxes of British takeover activity is that the defending side does not usually want to defeat the bid. Rather it wants the buyer to pay so much over the odds that the bid becomes irresistible.

The defending advisers want this because it makes them eligible for success fees - fees that are not triggered by defeating the bidder, but by going down to glorious defeat. Thus, the first thing they do, in negotiating the terms of their contracts for the defence, is setting what this 'over the odds' price should be, because that defines success. Once the figure is set, the role of the PRO is to feed it into the market - but to do so in such a way as to make the price seem completely unobtainable, so far out of sight as to be beyond shareholders' wildest dreams.

It is done a drip at a time - a hint here, a quiet off-the-record chat there, not too early, but not too late. Gullible journalists pick up the scent, as do gullible analysts, and feed it to one another until the price becomes a norm accepted by all. The one thing they rarely do is ask why that figure is indeed the maximum the firm is worth. If they did, they would realise that they had been set up.

- Anthony Hilton is City commentator on the London Evening Standard

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