John Cadbury had very few career choices. Although his family was wealthy his religious disposition as a Quaker meant that he could not pursue a career in law or medicine – for that required going to University - and as a pacifist a job in the army was out of the question.
So in 1842, at the age of 22, Cadbury opened a grocery shop on Bull Street, an affluent part of Birmingham. Unlike the others on the street he wouldn’t sell alcohol – something he considered the cause for many 19th century social ill’s – choosing instead to manufacture drinking chocolate and cocoa.
Today Cadbury is one the archetypal British industry stalwarts: rich in history, a proud heritage and deeply rooted in the public’s consciousness.
That, until last month, could be true. Now, over a century and a half after Cadbury opened on the corner of a Brummie street, the sweet tooth of Britain’s back bone has been removed.
Divorced from its birthplace it has been placed into the hands of American food giant Kraft: best known for the processed cheese they make for burgers.
The deal that took Cadbury across the Atlantic gathered pace last year. In September 2009 Kraft tabled a hostile bid of £10.2bn for the chocolate brand. This was promptly rejected by shareholders, considering the offer ‘derisory’, that it undermined the true value of the company.
Back to the drawing board went deal makers and on January 19th this year Irene Rosenfeld, Kraft Chairman, and Roger Carr, her opposite at Cadbury, shook hands on an 850pps deal, valuing a Cadbury at £11.6bn.
Everybody, it seemed, had an opinion. MP’s, in an election year, wanted job assurances for their constituents, shareholders took their hands out of profit-laden pockets and pointed at capitalism and Dairy Milk scoffers were left thinking: “Will it still taste the same?”
Cadbury, the great British chocolate maker, will, as off 19th March, no longer be a listed British company.
Felicity Loudon is the great granddaughter of John Cadbury and remembers it being one of those bright winters days when she heard news that the deal had been completed.
“It was a lovely day, and I think it was warm, but all that became irrelevant. I was having lunch with a friend in London when reality hit.
“My reaction was one of horror and disbelief, at the thought that a ‘plastic cheese company’ could even be considered worthy of one of our few remaining British jewels.”
Mrs Loudon feels “totally let down” by the then board of Cadbury, that they could erase the work of her great grandfather.
“I'm sure that my great grandfather would be totally horrified that the vision he had, the care for his workforce, the extreme sense of philanthropy should not only be swept away by greed, and devious share dealing, but also that the brand should fall into foreign hands.”
Hands of owners, she says, that neither care nor understand the iconic status that Cadbury has in the UK and across the world. Something Mrs Loudon ascribes to its “defining taste, affordability and Britishness”.
Jennie Formby, National Officer for the Food, Drink and Tobacco Sector at Unite the Union, has said there is no guarantee that workers’ jobs are safe under a Kraft; a company that sought a £7bn bond issue in order to finance a loan it used to buy Cadbury shares.
Formby’s fear was confirmed earlier this month when a Cadbury factory in Somerdale was closed, with it 400 hundred jobs.
She says: “The concern we have is for the long-term future of Cadbury workers and this is why we wanted Cadbury to remain independent.
“The debt level of Kraft is substantial and in our experience that risk is transferred to the workers. Kraft has already said that jobs are going to go in the UK regardless. Managerial jobs will be cut; they do not want to have two operations.”
Kraft, says Formby, has put the “albatross of [their] debt around Cadbury’s neck”.
But this isn’t just a case of confectionary robbery. Since the 1980’s Britain has become heavily invested in by foreign companies. Thirty years ago the proportion of shares owned on the UK stock market by rest of the world investors was 3.6%. During the 90’s-00’s this exploded and at the end of 2008 over forty-one percent of UK stocks were in the hands of international owners.
Some of the most recognisable names in Britain are in the hands of foreign owners, in industries as diverse as energy, sports, travel and cosmetics.
For example, if the gas or electricity that heats your home this winter or illuminates your living room is provided by EDF or E-ON then the chances are your bills went into the French or German economy respectively.
You’ve probably travelled using a Spanish airport despite never intended to have done so. BAA, who own London Heathrow (the world’s second busiest airport) as well as 5 other airports across the UK, are headed by the Spanish Ferrovial Group. Luggage gone missing? Try: ¿donde esta mi equipaje?
And the list goes on: Scottish and Newcastle, Bentley, P&O Ferries, o2, HP Sauce et cetera, at cetera.
So, why have companies come to British shores to invest their dollars, euro’s or oil-earned dirham? And shouldn’t something be done to protect long- standing British institutions?
MP John Redwood, co-chairman of the Conservative Party’s Policy Review Group on Economic Competitiveness, see’s foreign investment as inevitable, partly down to recent boom-bust economics.
Redwood believes that as a consequence of running a big balance of payments deficit, owing to excess credit and weak exports we are “bound to have import lots of capital to balance the books.
“In this global world one group of overseas shareholders will sell to a new group of overseas shareholders. No government is going to stop managers selling out if they wish, or stop international shareholders selling their shares for a good price.”
Ian Price of the CBI believes that the ease of at which investors can command a controlling stake in companies makes Britain a likely country to invest.
He added: “It is easier to buy into British businesses than it is in other parts of the world.
“Foreign investment is inevitable as part of a global economy and while the opportunities are still there we will still see it continue.
The Government itself backs the recent epidemic of takeovers. A Treasury spokesman said that inward investment (the injection of capital from an external source into a region; in this case the UK) in 2008-09 created and safeguarded almost eighty thousand jobs.
The spokesman said the reason why British companies have emerged as attractive business propositions is because the UK has created a “strong and open business environment, with a competitive tax policy (the UK has the lowest top corporate tax rate in the G7 of 28%). There is also a supportive legal system for businesses, a top competition regime, world-class talent and a flexible workforce, which fosters confidence, high-level skills, innovation, creativity and success.”
One firm that symbolised the industrial craftsmanship and elegant class of Rule Britannia was carmaker Jaguar. Roaring to the forefront of the British motor industry in the 1950’s, Jaguar was so elite and effortlessly sexy that the firm held Royal Warrants from HM The Queen and James Bond drove one. Jaguar was the jewel in the British crown.
A diamond that was removed when Ford, the American car manufacturer took over the firm in 1989. Since then the car manufacturer has not appeared on the London Stock Exchange having previously been a regular fixture on the FTSE 100.
In 2008 Ford sold Jaguar as part of a £1.4bn deal, which included other British manufacturer Land Rover, to Indian carmakers Tata Motors. At the time Chief Executive Ratan Tata said that he planned to support growth of the carmakers while “holding true to our principles of allowing the management and employees to bring their experience and expertise to bear on the growth of the business."
Explaining the takeover, Ashmita Pillay, Manager, Corporate Communications, at Tata Motors said the decision to take over Jaguar as one based partly on its esteemed history.
Pillay said: “Jaguar is renowned for its luxury saloons and is highly regarded. It has a long heritage in its segment and has tremendous unfulfilled market potential. This is why Tata Motors decided to acquire Jaguar.”
The biggest car manufacturer in India made substantial cost-cutting measures, reducing the British workforce by 2,000, out-sourcing production overseas and closing the firm’s pension scheme to new members.
In a move to prevent further job cuts, after reporting a sales decline across the two brands by 26% last year, Tata have urged new staff at Jaguar Land Rover to accept a one fifth wage reduction in return for a job guarantee until 2015.
“There are no plans to shift production from the UK,” added Pillay, in a way Jaguar Land Rover worker’s will find worryingly reminiscent to what was said two years earlier.
Jamie Sheppard, 21, from Bournemouth recently started a job at MUTV, the television channel commissioned by one of Britain’s most successful football clubs, Manchester United. He joins at a time when fans have been most vocal in their disdain for the clubs owners, the Glazer family.
Gradually gaining a controlling majority of shares in United, the Glazer’s assumed full ownership of United in June 2005. To finance the investment the Glazer family plunged into the loan market and have subsequently straddled the Club with debts of over £700 million, securing the debt on assets including the Club’s home stadium, Old Trafford, and Carrington training ground.
“I think most people I work with, myself included, would agree that as long as the owners have the best interest of Manchester United at heart and see it as a supporters club as well as a business, then it doesn’t really matter who the bosses are or where they're from,” said Mr. Sheppard.
The cameraman admits that he was aware of the clubs situation before accepting the job and that jobs cuts are usually one of the easiest ways to shore up a balance sheet.
But thethought doesn't occupy Sheppard.
“If you think like that day in day out then it will affect your work and then you stand even more chance to lose your job, so I think the best way is to do everything asked of you plus more and make yourself invaluable to the club so they can't afford to get rid of you.”
With corporations willing to flex their financial muscles across the world, what can be done to protect the British company? One idea that has been mooted is a review of the current UK takeover regulations.
Controlled by the independent Panel on Takeovers and Mergers, current rulings have been argued to benefit short term traders like hedge funds. Their transactions are rewarded on the basis that they can short sell at the expense of long term shareholders. When shares in Cadbury rallied on the back of Kraft’s interest long term shareholders sold a quarter of the company to hedge fund managers, taking the traders’ final stake in the institution to 31% when all that is needed for a formal takeover is 50%.
Reacting to this Roger Carr described a last minute panic to buy leveraged shares as “individuals controlling shares which they had owned for only a few days or weeks determined the destiny of a company that had been built over almost 200 years."
Another possible reform is to reduce the level at which movements in securities have to be formally disclosed to 0.5% from its current 1%, giving shareholders better clarity as to who owns what of any company. This would ultimately aid shareholder wanting to hold out for the best possible price for their stock. One further proposal is to increase the takeover threshold to 60% - so as to reduce the impact of short term investors against long term ones.
Vince Cable, Liberal Democrat Treasury spokesman, has been vocal in his support for the reintroduction of a public interest test when a takeover for a British company emerges. This would replace the current Enterprise Act, established in 2002, which critics say focuses specifically on competition issues.
But why, when news emerges of a possible foreign bid, is it met with such hostility. The UK’s economy grew just 0.02% in the fourth quarter of last year. Britain is looking over the edge at a potential double-dipped recession. Oil prices and the end of the VAT ‘holiday’ meant inflation has soared to a fourteen month high of 3.5%. The pound remains a vulnerable currency; down 16% against the dollar in the last two years.
The truth is Britain is currently like a high street shop during the winter sales. A potential investor could pick up a bargain and save a fortune on one of Britain’s most established companies.
A British heavyweight like Sainsbury’s could be up for grab. Having rejected a 600pps bid in 2007 the supermarket is trading at just below half that now. Perhaps the Sainsburys family, who own 15% of the company, would consider a fresh bid.
Maybe the troubled British Airways could go the same way as the airport it is based. The once-great airline has undoubtedly had its problems: Terminal 5, the threat of strike, cutting pension plans, not forgetting the £401m loss it made last year. Having merged with Iberian Airlines last year maybe it’s time someone took the British out of the flagship airline.
And why not?
Over 70% of the earnings made by the top 100 companies on London Stock Exchange (LSE) come from abroad. Given that Britain has experienced a much deeper and longer recession than most other countries shouldn’t we be praying for further foreign investment?
Lord Meghad Desai, professor at the London School of Economics thinks it’s time we accepted the integration of foreign investment in British life.
The economist said: “I welcome foreign investment in Britain. The whole notion of national and foreign should erode as we globalise more and more.”
We may cry foul when one of our cherished companies falls into the ownership of investors but what we don’t bemoan is when our companies do exactly the same. Indeed the UK invested more than £520bn abroad between 1996-2005.
As for Cadbury? Perhaps we shouldn’t feel such a sense of loss. Jennie Formby explains: “We shouldn’t feel too sentimental about Cadbury. Sixty per cent of its shareholders before the takeover weren’t British. It was more American than British but it was listed I this country. Companies aren’t really interested in anything other than bottom line.”
And that, above all, is why in a globalised world there is very little we can do to stop the swiping of what we used to think of as the heart of Britain.
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