Cadbury's Crunchie time

Cadbury's Crunchie time

The independence and identity of yet another British firm is being threatened by an overseas predator as Cadbury fights off the advances of US giant Kraft. On the one hand it is reassuring to celebrate the best of British, be it in sport, food or industry. Yet the economics behind insisting that British factories remain British-owned are not overwhelming.

This sort of nationalistic flag waving might deliver a bit extra tax revenue for the treasury, it might produce a handful of trade spin-offs on the assumption that British businesses may favour working with other British businesses. Yet there are also strong counter-arguments, such as securing vital access to overseas markets through a well-placed overseas parent.

National boundaries have been blurred by free market enterprise with investors able to mop-up profits earned on the other side of the world, yet when push comes to shove, if someone offers to buy a company for significantly more than that company is likely to be priced on the market in any foreseeable future, investors would be mad to turn that down.

Yet it remains unclear that this is what Kraft has done. It’s £10 billion package does offer a cash element, but much of the deal would be financed by its own paper. This makes the deal on the table more difficult to value than a pure cash offer, and requires investors to swap a set of fundamentals with which they are familiar for another with which they are not. Turning that down would not be mad at all.

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