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Kraft Foods (NYSE:KFT) Under Fire from British Regulators


Saturday, March 6th, 2010

Kraft Foods (NYSE:KFT) is being taken to task in the U.K. over allegedly misleading investors and workers of Cadbury PLC when battling to take over the candy factory based in Keynsham, which they ended up winning.

An investigation has been launched by regulators in the U.K. on whether or not Kraft Foods intentionally misled those associated with the company.

The Panel on Takeovers and Mergers is particularly interested in the content of letters and other communications by Kraft concerning Cadbury, which seemed to give the impression they were going to keep the factory open in Keynsham, although at this time it seems Kraft said they believed they would be able to keep it open; a big difference.

Why this is important if Kraft made an explicit promise, is Cadbury itself had already stated they wre going to close the plant there and move it to Poland. If the approval of the acquisitions was based on that factor alone, Kraft obviously added nothing to the deal, as it looks like the same fate awaits it that Cadbury was going to do to it.

All of this is being debated now because Kraft announced in February they're now going to shut down the plant sometime in 2011.

Jacob Rees-Mogg, who represents the region, received a letter from the Panel on Takeovers and Mergers asking him to look into the situation.

Rees-Mogg stated in an e-mail that "It gave people in Keynsham false hope in its prospectus which was either careless or deliberately misleading."

No matter what happens though, under current regulations there really isn't anything that can be done other than negative publicity toward Kraft if they were found to have made actual promises concerning the deal to keep the plant open.

There has been an extraordinary amount of frustration in Britain over its ability to keep work in the country, and this has revealed another tipping point in the matter.

While it has generated interest in changing some of its takeover rules, possibly they should look at supporting free markets and moving away from socialism as the key way to make Britain a great place to do business in again.

Until that happens, situations like this will continue on.



Article by Gary B

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com



Tags: british business , cadbury plc , kraft foods