LONDON BRIEFING:Any post-holiday depression in the City has been blown away by a flurry of deals
IT WAS back to work with a bang in the City of London this week, with any post-holiday depression blown away by a flurry of deals led by Kraft Foods’s unsolicited £10.2 billion approach for confectionery group Cadbury.
With the grim first anniversary of the collapse of Lehman Brothers just days away, a more sombre mood might have been in order for September. But the Kraft move set the markets alight, raising hopes that the mega-deal might be back.
That feeling was reinforced yesterday with news of a £7 billion merger agreement between mobile phone operators Orange, owned by France Telecom, and T-Mobile, owned by Deutsche Telekom. They plan to combine their UK operations in a move that will catapult the combined business into lead position in the fiercely-competitive UK mobile phone market. With a share of 37 per cent, the new company will leapfrog rivals O2 and Vodafone.
The rumour mill has now gone into overdrive, with mining giant Xstrata said to be drawing up plans for a £3 billion-plus return bid for Lonmin.
Also tipped as takeover targets are SAB Miller and Diageo and, in the retail sector, there are renewed doubts that BQ group Kingfisher can retain its independence for much longer.
Although Cadbury has long been tipped as a takeover target, news of the Kraft approach caught the market on the hop on Monday, sending Cadbury shares surging by more than 40 per cent. Good news for shareholders but there was wider dismay at the prospect of another famous British name, particularly one behind such much-loved products as Crème Eggs, Crunchies and Liquorice Allsorts, falling to foreign buyers.
Founded by Quakers almost 200 years ago, Cadbury’s headquarters remain in Bournville, near Birmingham, the garden village built by George Cadbury towards the end of the 19th-century to house his workers.
That paternalism has long been consigned to history as Cadbury battles for its business in the global market but the company retains a reputation as one of our more socially-responsible companies. It recently switched its leading chocolate brand, Dairy Milk, to Fairtrade, and has proved a responsible owner of Green Black’s, confounding fears that GB’s ethical reputation would be ruined when Cadbury took it over.
As the much smaller Cadbury squares up to resist its giant US predator, the British company will doubtless play up the cultural contrast between the two groups.
Kraft, with global sales of more than £25 billion against Cadbury’s £5 billion or so, has a reputation for ruthlessness and, while it owns leading brands such as Oreo, Ritz and Kenco, many of its products are little more than junk food. But shareholders are ruthless too. They are not minded to accept Kraft’s 745p a share terms, but would almost certainly be persuaded by an offer nearer £10.
Cadbury is also likely to find that playing the patriotic card won’t help much – more than 40 per cent of its stock is already owned by US institutions, which have few qualms about Kraft’s corporate reputation.
As Cadbury heads towards foreign ownership, another famous British name is coming home after almost two decades. The upmarket Aquascutum brand, which dates back to 1851, is joining forces with the equally distinguished Jaeger name, creating a heritage British fashion house with global sales of more than £300 million.
It was more than 150 years ago that Aquascutum’s founder, John Emary, a Mayfair tailor, came up with a revolutionary way of making wool water-repellent. The technology was used in overcoats for British soldiers serving in the Crimean War – hence the term trench coat.
Since then, Aquascutum – named from the Latin aqua for water and scutum for shield – has been sported by Hollywood stars such as Cary Grant, Humphrey Bogart and Michael Caine, as well as Winston Churchill and Margaret Thatcher.
The business was taken over by Japanese company Renown almost 20 years ago, but has never really thrived under foreign ownership. Now veteran retail entrepreneur Harold Tillman, credited with transforming the fortunes of the 125-year-old Jaeger label, has bought Aquascutum from the Japanese and is confident he can replicate the success he’s had at Jaeger, which is run by former Debenhams chief executive Belinda Earl.
Aquascutum’s return to British ownership should draw a line under its recent chequered history. The business has struggled to make profits in recent years, and was finally put on the auction block by the Japanese a year or so ago. Its former chief executive Kim Winser, who was behind the revamp of the luxury Pringle brand, quit the company in May when her attempt at a management buyout was rebuffed.
Although its name has global cachet, Aquascutum struggled to increase its presence, particularly in Asia, and its new owners plan to focus on the US and Russia.
Fiona Walsh writes for the Guardiannewspaper in London
