Kraft the US processed food makers are making a bid for Cadbury the Quaker founded British chocolate business. Whether it will succeed isn’t clear but it’s another well known British name going under the hammer. The market has no sentiment about that and maybe rightly so from its perspective. Also from what I read a significant number of shares are already held overseas. Cadbury has recently sold off its Schweppes arm under pressure from ‘activist’ shareholders. I don’t know much about these but they seem to be smallish shareholders who have a lot of say somehow. Selling off Schweppes may not have had any effect as a good deal can break up a company and sell bits to various others.
If it was a one off then maybe it wouldn’t be a worry but it’s part of a long stream of British companies that are going into foreign ownership. Names that have existed for decades: Rowntree, ICI, P&O, Pilkington, Blue Circle, Jaguar, Scottish & Newcastle, Marconi, also water, electricity, rail, the list goes on. Sometimes companies like Pilkington are taken over by smaller competitors. Sometimes the sale has knock on effects such as the giant ICI chemical works on Teesside is now split into small companies and the difficulties and manoeuvring of a few are putting a strain on the viability of the whole site. Sometimes the company hasn’t enough money anyway and it’s a good thing.
France created a protected list and Danone a food manufacturer was surprisingly added when a possible takeover resulted. It isn’t a clear cut case that there should be protection as taking a cash payment, usually at a price well above the level the share had been trading at, provides opportunities for other investment. Also a British financial company often handles the deal and it’s lucrative work. Against that is loss of local control, prestige, movement of future profits overseas and one less large British share to trade.
How many of these businesses are left to sell and what happens when all large companies are owned overseas? A bit like eating all your stored food. Some people believe privatising companies is selling the family silver but it seems to me that selling major companies to overseas buyers is selling the family savings and gold and retiring. At a time of difficulty work is often ‘rationalised’ and ‘re-patriated’ closing the factories and offices in subsidiaries. You can’t bring a power station home but a chocolate factory maybe. So I’m hoping Cadbury remains independent and I’m buying chocolate bars to push the share price higher.