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Marbled chocolate: Kraft Foods takes over Cadbury; job losses anticipated

Cadbury's Dairy Milk chocolate and Kraft's Milka and Toblerone will belong to the same corporation

Job losses are “an inevitability” at Cadbury after its takeover by US giant Kraft Foods, the UK firm's chairman has confirmed to the BBC. Without estimating how many positions would be affected, Roger Carr said jobs would go at Cadbury's head office in Uxbridge, London.

However, he added that he saw Kraft both supporting and developing Cadbury's UK production facilities.

Mr Carr was speaking after Cadbury's board backed a £11.5bn bid from Kraft.

Prime Minister Gordon Brown said the government was “determined” to ensure that Cadbury jobs were secure.

“We are determined that the levels of investment that take place in Cadbury in the United Kingdom are maintained and we are determined that, at a time when people are worried about their jobs, that jobs in Cadbury can be secure,” he said.

Cadbury's directors have advised the firm's shareholders to accept the offer, which represents 840 pence per share. Investors will also get a 10p per share dividend.

Shareholders now have until 2 February to back the deal which, led by Cadbury's large institutional investors, is expected to be a formality.

Kraft's offer consists of 500 pence in cash, with the rest made up of Kraft shares. The US group will borrow £7bn to finance the deal.

US billionaire Warren Buffett, who owns a near-10% stake in Kraft, had warned Rosenfeld not to overpay and issue too many new Kraft shares. Kraft said on Tuesday it was issuing 265 million new Kraft shares compared with its original plan to issue 370 million.

The announcement that Kraft and Cadbury had reached agreement on a takeover was made on Tuesday after Kraft increased its previous hostile offer of £ 10.5 billion, which Cadbury had rejected.

In an interview with BBC business editor Robert Peston, Mr Carr admitted that the decision to accept Kraft's improved offer was a “bittersweet moment”.

However, he said the deal represented good value for Cadbury shareholders, which was what he was paid to focus on.

Although “there will clearly be some cost savings they have to make”, Mr Carr said he hoped Kraft would take on some of Cadbury's senior team.

“People are the key to successful businesses, they need to be cared for, and I'm sure Kraft understands that,” he said.

“I shall miss not being chairman of Cadbury, but I'm sure those that own it now will develop it as a strong company, respecting its British roots, but growing it as a global company.”

Business Secretary Peter Mandelson said Kraft's chairman and chief executive Irene Rosenfeld had already written to him to assure him of Kraft's “respect for Cadbury's heritage and employees”.

He added that he had now invited Ms Rosenfeld for talks on the details of Kraft's plans, which he said he would then immediately disclose to the Cadbury workforce.

Kraft has already said it expects to achieve “meaningful cost savings” as a result of the merger.

While it has given no specific assurances over the future of 4,500 UK jobs, it says it wants to invest in Cadbury's Bournville site in Birmingham, and maintain production at Somerdale, near Bristol, also known as Keynsham.

David Cumming, head of UK equities at Cadbury shareholder Standard Life, said that he would be backing the takeover.

“I won't go against the view of Cadbury's management,” he told the BBC.

“Kraft are getting a good deal. It's sad that Cadbury is gone, but business is business.” Ms Rosenfeld said the deal was good news for shareholders and staff.

“We have great respect for Cadbury's brands, heritage and people,” she said. “We believe they will thrive as part of Kraft Foods”.

The deal would create the world's largest confectionery group ahead of privately owned Mars-Wrigley and bring under one roof Cadbury's Dairy Milk chocolate and Trident gum and Kraft's Milka, Toblerone and Terry's chocolate brands.

The Kraft offer could yet spur a counter-bid from the Dairy Milk maker's US rival Hershey. Kraft had previously increased the cash portion of its offer without raising the overall bid, which the Cadbury board described as ”derisory”. (BBC)