Earlier this month, after more than four months of delay, Cadbury accepted Kraft Food’s takeover. The new conglomeration will be among the largest food makers, generating an estimated fifty billion dollars of revenue a year. It is projected that the combined company will capture roughly fifteen percent of the market for confectioneries, tying with US-based Mars, Incorporated for largest in that segment.

Kraft first proposed the takeover in November of last year. Cadbury actively resisted Kraft’s numerous tenders until finally accepting a $19.5 billion offer. The offer consists of 500 pence for every Cadbury share, as well as 18.74 percent of a new Kraft share. This works out, at current valuations, to about 840 pence ($13.43) per share of Cadbury stock.

Cadbury’s chairman previously publicly decried the deal, reserving particular disdain for Kraft’s “low growth conglomerate business model, its long history of underperformance and its track record of missed targets.” As recently as January 12, seven days before accepting the deal, he publicly implored Cadbury shareholders to not “let Kraft steal [their] company with its derisory offer.’’

Kraft looks to this deal to increase its penetration in overseas market. Cadbury has a comparatively small presence in the US, deriving most of its revenues from European and developing markets. After combining their operations, the company will have large operations in the socalled BRIC block (Brazil, Russia, India, and China) of rapidly-developing countries. Kraft hopes these operations will accelerate the company’s growth.

Such hopes are well founded. The traditional markets for the confections that Cadbury produces are saturated. The only way to grow significantly is to steal market share from entrenched competitors. By acquiring Cadbury, Kraft is gaining a foothold in developing countries where income levels have only recently risen to levels allowing for the procurement of such luxuries as chocolate.

The deal has engendered mixed reactions in the UK, Cadbury’s home market and its primary manufacturing base. There are worries about the potential loss of jobs and national icon, which add color to what would otherwise be a simple dollarand- cents evaluation. A trade union, Unite, predicted more than twenty-seven thousand employees would lose their jobs. However, Kraft has announced that as a condition of the deal it will honor all labor contract obligations, including pensions. Irene Rosenfield, Kraft’s CEO, responded, saying that the “the concerns about jobs and job losses, particularly in the manufacturing community, are greatly overstated.”

Prior to accepting Kraft’s offer, Cadbury stated that they would rather be purchased by Hershey, the US confectioner. Cadbury believed that an arrangement with Hershey’s would be preferable because they believed Hershey’s corporate values better aligned with their own.

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