Cadbury: The break up
I have learned that is planning to break itself into two companies, one concentrating on chocolate and confectionery, the other consisting of its US beverages operations.
Cadbury鈥檚 board has been meeting today to finalise the decision. An announcement from the company could come as soon as tomorrow morning
If all goes to plan, Cadbury shareholders will find themselves owning two shares for every one they currently hold, one in the core confectionery business, the other in the US soft drinks operation.
However financial preparations for the break-up will take some time and the demerger may not be completed till the autumn.
According to analysts, the beverage business could be worth up to 拢7bn as a separate entity, while the chocolate and chewing gum operations could be worth an estimated 拢9bn 鈥 which compares with a market value for the combined group right now of 拢12.6bn.
The decision to demerge its US drinks business 鈥 which owns famous brands such as Dr Pepper and Canada Dry 鈥 may look like a victory for Nelson Peltz, the noted US activist investor, who has almost 3 per cent of Cadbury.
Mr Peltz has made it clear to Cadbury that he wants the business split in two.
However Cadbury has been considering splitting itself for some months, according to sources close to the group. 鈥淭his is something that鈥檚 been worked on before Mr Peltz came on to the scene,鈥 said a source.
In recent months, the company has suffered a few problems in its confectionery side: the withdrawal from sale of thousands of chocolate bars last year, after the Food Standards Agency discovered that there had been a ; the a few weeks ago, because they weren鈥檛 labelled as being unsuitable for those with nut allergies; the discovery that the 鈥渇inancial position鈥 in Nigeria had been 鈥渙verstated鈥 for a number of years.
These difficulties have raised questions about whether the combination of drinks and beverages in a single entity had made the business harder to manage effectively.
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And how long before the two smaller companies are gobbled up by a European or American conglomerate?
I think the decision is apt for two most important reasons.
First, every company reaches a critical mass beyond which it is difficult to sustain it in the same form. The managerial costs escalate and focus gets reduced on critical activities in which the organization has core competence.
Second, the soft-drinks business and the confectionary business are two different games and focus is necessary in each of the areas separately. This means that there might be two different organizational structures and also that the resource allocation might follow different patterns.
Keeping the above two issues in view, the decision is an apt one. But the execution of the demerger must be done carefully and the brand equity of cadbury's must be preserved at all costs. The public trusts the brand not the demerger!
Is Mr Peltz being paid a salary by CS? He is after all making the managements decisions!
buzzzzz buzzzzz buzzzzz
"First, every company reaches a critical mass beyond which it is difficult to sustain it in the same form. The managerial costs escalate and focus gets reduced on critical activities in which the organization has core competence." buzzzzz buzzzz buzzzzzz
Utter rubbish. They are splitting because they can generate two companies worth 16 billion from one worth 12 billion which is a fine idea if you own a lot of Cadbury shares. and fancy increasing your wealth by 25%. Also attractive if you get paid a bonus according to share price value which probably applies to the entire board making the decision.
Yet another successful British company is being made ready to be broken up and sold to the highest bidder. Another example of the 'Great British Sell-out'.
What is wrong at the heart of the British Corporate Management system that even our most successful companies and brands are prepared to hand future value creation to yet another American / Overseas investor?
I cannot believe you would see this degree of complicit action in the Boards of our European counterparts in Germany and France. Is it that the Boards here are responsible solely to their major shareholders who seek gains at any cost and are driven by their 'fat cat' rewards.
What responsibility do these Boards feel to their employees, the prospects and aspirations of future generations and importantly - their heritage?
The answer I feel is - 'not much'.
Shame on them.
So if it's "synergy" when the sum of two companies is worth more than the its parts, what's it called when it's worth less? "Analergy"?
And where does the value go? I can just about understand synergy, because of the costs associated with duplicated structures in both companies, but how does the opposite case come about?
I do not believe that this is good for Cadbury, the 2 smaller companies will now be much more palatable by hostile preditors.
Since the reason for demerginging is to 1, increase shareholder value and 2, because managers "cannot cope" with the different style of management required, then why don't we suggest that other foreign companies are split up, like Nestle, whats the link between chocolate and coffee. Or proctor and gamble, after all Pringles have got nothing to do with household detergents.
So why pick on the British companies? because they can. In no other country would foreigners be allowed to dictate the terms, so here we are on the brink of seeing 3 FTSE companies under attack by foreign venture capitalists. (Boots, Sainsburys and Cadbury.)
Might I suggest the names "Cadburys" for the company that produces the choccies and "Schweppes" for the one that does the drinks.
That'll be a tenner.
Ker-Ching.
I think Cadburys soggy and oily 'chocolate' is an abomination to jewelled flavour of pure Cocoa.
Yet another example of British bad management.It will soon end in another great British Company being sold to a foreign preditor. When will they wake up?
This was inevitable. The combined group does not really have an idea how to go forward. There is no prospect of a trade sale for Dr Pepper which would release enough funds for the Confectionery business to make acquisitions. So this is the result.
The key question is whether Cadbury can survive long enough as a separate company to add to the stable before it is itself bought. If that happens we lose a great British company.
Graham Taylor wrote:
"Might I suggest the names "Cadburys" for the company that produces the choccies and "Schweppes" for the one that does the drinks.
That'll be a tenner."
You're the cheapest PR man in town.
This is just another British company being exploited purely for shareholder value.
No doubt once the private equity locusts get their hands on the chocolate business we will see the closure of the Bournville factory and more than a century of history will just vanish, as with so many other once-great British companies.
The time is long past for companies in Germany, Britain and Canada, the countries most often targeted, to tell these American raiders to go 'Stuff It.' They buy 5% or less of a company's stock, often using borrowed money, then wage brash and loud psychological warfare, and when it's all over they take the money and run off to find their next victims. These are not creators of value, nor even good managers. They specialize in gutting comnpanies and destroying employment. In Germany I have seen several efficient companies, producers of quality goods, taken over and gutted by these American pirates. In several cases they moved production from Europe to China, while retaining the very valuable brand names. Why do our spineless governments allow this? In the name of laissez faire "capitalism?" Which is being elevated to semi-religious status? To pharaphrase Alexander Dubchek, this is the ugly and brutal face of capitalism.
The irony is that these buckaneers are using 'printing press' money which is the reality of today's American dollar, but that is another sorry story that will, I believe, break and be exposed one day soon.
I have a friend who works in Cadbury's who tells me there is a huge amount of dead wood in management dragging the company down. Cadbury's has very little commercial focus to drive itself forwards.
As a Brummie i thank the contribution Cadbury's has made to our area. I hope employment and expertise of Cadbury's stays in Bournville.
Another British company soon to be destroyed by the Americans. How long before the UK public realize the Americans make all our foreign/domestic decisions? We don't have an independent government. The American activities in Europe must be resticted - it's virtually legalized theft. In reality the current legal and economic framework is 100% for the Americans, Europe exists just to be exploited. Labour/Tories and the rest of the European political elite rest have no regard for these real issues affecting the entire population. Let's be honest, people from Eton/Oxbridge don't have any idea what's going on. Don't even mention the Trident scam or the "Missle defence" shield - these are all serious attacks on our nation. The Americans should leave Europe.
Cadbury's and Schweppes are likely to be taken over by a hedgefund, a parasitic investment company who uses borrowed capital to buy up companies and take over control. Once they have the right amount of investment they take full control, asset strip and then sell the company. They make humungous profits and leave. They are a set of locusts. What we will no doubt see is oe of these funds taking over either or both of the newly vulnerablised firms, Cadbury.Schweppes. They will remove all the valuable machines in the British chocolate factories and american bottling/tinnng plants and sell them. They will keep hold of the name and licence it to cheap importers of products from asia and south america. There will be massive redundancies in the UK because we have a much more relaxed law regarding hiring and redundancy. Jobs in ROI, Poland and France (where cadbury also manufacture) will be safeguarded. The equipment from bourneville will no doubt be moved to Poland or Slovakia. This may not happen but this sort of hostile takeover and breakover has been increasing dramitically.
I will certainly agree by some of the comments posted so far. Splitting Cadbury's in two, will obviously make two smaller companies, and will attract some unwelcome preditor's looking to pick off well know branded companies, such as cadbury and schweppes along with there many house hold brands. How long can us brits allow UK companies to fall into foreign hands, My point is "Where is Terry's and Rownetree's, all eaten up!!!
I am very sad about the hostility some of you have about Americans.
A very great portion of my fellow
Americans came from England, My family did,and we still have relatives there. We are just trying to survive like any other Nation.
I sure wouldn't want to buy any stock in your companies if you think we are such horrible pirates.
If your country were ever in trouble, you can bet your sweet behinds we'd be right there to defend you, but I'll bet you wouldn't do the same for us.
It seems your hatred runs deeper than soda and chocolate, pretty sad, I rather enjoy Hershey's chocolate myself but to each his own.