Thursday, 11 February 2010

Keynsham closure was inevitable when Cadbury hiked the price

The decision by Kraft to close the Cadbury factory at Keynsham has been met with moral outrage, but frankly it was inevitable at a price of 850p per share.

Admittedly, the Americans have been a little disingenuous. Keeping Keyhsham open was part of their opening part cash, part share offer designed to cosy up to the workforce, they just didn't withdraw the idea when the price went up.

850p per share has left Kraft having to look for big synergies and a plant which had already been earmarked for closure by the Cadbury management was the obvious fall guy.

Here-in lies the problem. The Cadbury management team have a duty to act in the best interests of shareholders, which meant getting the maximum amount of cash for the company. However, maximum cash is bad news for the workforce, because the new owners have to start looking for big savings.

What happens next? Well if I was a Cadbury employee I would be hoping that Kraft put some good numbers on the board when they next report. If not, all bets and all promises are off.


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