LONDON - Kraft Foods came under heavy fire from UK parliamentarians on Tuesday for raising false hopes about the future of a Cadbury plant as it battled to win control of the British chocolatier.
Kraft had possibly violated the country's code on mergers and acquisitions after its U-turn on the closure of the Somerdale plant, parliamentarians said in a hearing, creating uncertainty for workers and inflicting reputational damage on itself.
We never believed Kraft would keep Somerdale open. It was cynical of them to pretend they would, said Jack Dromey, deputy general secretary of trade union Unite.
We propose a mergers and takeover commission to act in the best interest of companies and workers, he said.
The sale of Cadbury, a cherished British brand, has sparked heavyweight politicians, including business minister Peter Mandelson, to express disquiet about the deal, and was followed by a consultation on the way mergers are conducted.
Kraft was claiming ignorance on a massive scale, said Roger Berry, a Labour member of parliament.
He also queried whether the U.S. food group was under investigation by the Takeover Panel for its misleading statements and whether it had taken external advice before saying it wanted to keep Somerdale open.
The hearing comes at an inconvenient time for Peter Kiernan, a senior banker at Lazard who advised Kraft on the deal, and who is about to become head of the Takeover Panel -- the country's takeover watchdog. His appointment to the panel was delayed twice during the Cadbury takeover process.
The panel in February launched a public consultation on the way mergers are conducted, and while it made no specific reference to the Cadbury situation, it did mention Mandelson's suggestions for consideration.
Kraft Chief Executive Irene Rosenfeld -- who did not attend the session of the Business Select Committee, to the consternation of MPs -- had said in a letter to Cadbury chairman Roger Carr in September she believed her company would be in a position to keep it open. But on Feb. 9, Kraft said Somerdale would close, with the loss of around 400 jobs.
We understand we raised expectations and that our statements created uncertainty. We are terribly sorry about that. I am personally sorry about that, said Marc Firestone, Kraft executive vice-president, who oversees corporate and legal affairs and reports to Rosenfeld.
Firestone -- who said he did not believe Rosenfeld had yet visited a British Cadbury facility -- said the change in plan was because Kraft was unaware of the scale of Cadbury's production in Poland while bidding for the company.
What we did not know while the bid was progressing was that Cadbury was installing tens of million of pounds worth of equipment in Poland while running Somerdale, said Firestone.
We started to realise in late-January that we couldn't run the production in parallel at such tremendous cost, he said.
Firestone added that Kraft decided to close Somerdale on Feb. 5 and that Rosenfeld did not brief business minister Peter Mandelson about the company's thinking at a meeting three days earlier, when Kraft also declared it had almost 72 percent of Cadbury's stock to seal the takeover.
He declined to speak about the Takeover Panel because he said it operates under confidentiality, but he added that Kraft was prepared to confirm in writing who its advisers were and what they had said about the plant. (Editing by Rupert Winchester)