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January 19, 2010

UPDATE 2: UK: Kraft dismisses UK job concern

Kraft Foods has dismissed concerns that its proposed acquisition of Cadbury will result in job cuts or site closures in the UK.

Kraft Foods has dismissed concerns that its proposed acquisition of Cadbury will result in job cuts or site closures in the UK.

The US food giant this morning (19 January) announced that it had won the unanimous support of Cadbury’s board after increasing its offer for the Dairy Milk maker to an enterprise value of GBP11.5bn (US$18.8bn), up from its previous bid of GBP10.5bn.

The news has fuelled concerns that Kraft will slash UK jobs in its bid to strip costs out of the business.

Speaking at a press conference in London today, UK Prime Minister Gordon Brown said that he was “determined” that “jobs in Cadbury can be secure”.

“We are determined that the levels of investment that take place in Cadbury in the United Kingdom are maintained,” Brown insisted.

Meanwhile, the Unite trade union, representing Cadbury workers in the UK and Ireland, has expressed fears that the merger will result in cuts in Cadbury’s home country as Kraft looks to reduce its debt levels.

“This is a very sad day for UK manufacturing. A successful, iconic, independent UK brand will now be owned by a giant company with massive debt,” Jennie Formby, Unite’s national officer for food and drink, said.

“We have very real fears about how Kraft will repay its debt, particularly as it has ratcheted it up still further in order to purchase Cadbury.”

During a conference call this afternoon, Kraft chairman and CEO Irene Rosenfeld reiterated the company’s earlier pledge that it would not reduce Cadbury’s UK factory footprint.

“We expect to continue with a significant presence in this market and we believe that advanced scale will allow us to continue to invest in Cadbury facilities, such as Bournville,” she said. “We expect to be a net importer of jobs to the UK.”

Nevertheless, Kraft also revealed that it is now targeting annual cost savings of US$675m. Kraft said that the combined company will be able to reduce operational costs by $300m a year, general and administrative expenses by $250m and marketing and selling costs by $125m.

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