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Debt-heavy Kraft could put 30,000 Cadbury jobs at risk, warns Unite

13th January 2010

A colossal £22 billion worth* of debt will swamp Cadbury and could put at risk some 30,000 jobs, including around 7,000 jobs at Cadbury itself, if Kraft's bid for the confectionery company wins through.

So believes Unite, the country's biggest union, which is leading a fight to ensure that Cadbury's independence is not a casualty of UK takeover culture.

Unite is seriously concerned that the interests of the company, its workforce and its extensive supply chain will be placed at risk if Kraft is able to push through its hostile bid.  The union has today (Wednesday) distributed a briefing to all Cadbury investors asking them to put the wider public interest implications of losing Cadbury's independence before the narrow issue of share price. 

In its briefing to shareholders, Unite warns that:

• Kraft's need to service its colossal debt puts jobs and investment under serious threat and has led to extensive out-sourcing.  Between 2004 and 2008 alone, Kraft shed 19,000 jobs and closed 35 sites to help pay down its debt, which has since grown to an estimated £22 billion*
• Kraft ownership could see control of Cadbury move from the UK to Illinois, USA, in the process putting at risk 7,000 direct jobs and at least 20,000 more in the wider supply chain
• Kraft's huge product portfolio, stretching from processed cheese to groceries, is not a good fit with Cadbury, which is renowned and loved as a chocolate maker.  Locating it within a disparate portfolio will damage the Cadbury brand

Unite contrasts this with Cadbury's own performance which has seen the company grow by 6 per cent year on year for the past four years, post a 30 per cent increase in its pre-tax profits and its commitment to the ethical trading deepen.

Jennie Formby, Unite national officer for food and drink, urges Cadbury shareholders to resist Kraft's offers: "Cadbury has clearly demonstrated its strength as a standalone company. Contrast that with Kraft's excessive debt, under-performance and the unacceptable risks this brings for Cadbury and it is hard to see any wisdom in this bid whatsoever.

"This is not a question of whether the offer is too low or if the mix of shares to cash is appropriate, but whether Kraft is right for Cadbury now and in the longer term.  We have given Kraft repeated opportunities to provide assurances on jobs and investment but on every occasion the company has declined to do so, adding to concerns that Cadbury workers and their communities are not a priority.

"But if decisions about Cadbury's future are transferred from Britain to Northfield, Illinois, it won't just be workers who lose.  It will be Cadbury with its history of much-loved products and much-admired philanthropy, along with UK business, that suffer.

"When it comes to Cadbury's future, shareholders and workers share a common cause so we appeal to investors now, protect Cadbury as an independent company and kick Kraft's bid into touch."

Unite has today sent its briefing paper to all Cadbury shareholders.  Earlier this week (Tuesday), Unite gave evidence to the influential Select Committee on Business and Innovation which is looking at the questions the bid for Cadbury poses for UK corporate governance and investor practices more generally.

ENDS

*According to Unite's shareholder briefing, long term debt at Kraft has skyrocketed from $7.08 billion in 2006 to $18.54 billion in 2008.  With the additional arrangements Kraft has made to take on up to £5.5 billion in debt to help complete the purchase of Cadbury, Unite believes this brings Kraft’s total debt to an estimated £22 billion.