Many of us remember the takeover of UK confectioner Cadbury by US food group Kraft in early 2010. As HR practitioners we particularly noted the disruption to employees at one Cadbury manufacturing site, Somerdale near Bristol, where Double Deckers were made. During the bid process Kraft led employees at Somerdale to believe that they would keep the plant open, unlike under Cadbury who had plans to move production to Poland.
However, only seven days after the takeover was completed, new owners Kraft announced that they too would close the plant and move production to Poland. How could they go back on their word after making such assurances to the workforce? Hadn’t they done their homework properly? The Takeover Panel, which is responsible for the City Code on Takeovers and Mergers, eventually censured Kraft for misleading employees although they found that it had acted in good faith.
The Takeover Panel published a consultation in summer 2010 on changes to the code, largely to redress the balance in favour of target companies. There were other reasons to review it, but there is no doubt that many people had Cadbury on their mind as they considered the new proposals. After all, former Cadbury boss Roger Carr (now Sir Roger and from June President of the CBI) had expressed his own concerns on aspects of the process at a speech to Said Business School in Oxford.
Following the summer 2010 consultation, the Takeover Panel has now produced specific redrafting of its code for final consultation by May 2011. Some of the changes will be of particular interest to HR practitioners as one whole section is on “providing greater recognition of the interests of offeree (target) company employees”. For example employee representatives should have the right to receive information earlier in the offer stage and bidding companies should stick to the intentions affecting employment or terms of employment for at least 12 months unless they specify an alternative time line. In other rewording, the code will make it clearer that the board of the target company is able to consider other factors in addition to the offer price.
So will these changes make much difference and are they a good thing? Arguably these changes are primarily to do with details of process rather than significant changes to anyone’s rights. However, points of process can sometimes help one side of an argument get heard more readily. And clearly, from the point of view of achieving effective change, it must be better to stick to your proposals for more than seven days. It may not prevent the loss of chocolate production from the UK but it might improve the acquiring company’s approach to its new employees.