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May 27, 2010 4:10 PM

Public Reprimand for Kraft in Cadbury Plant Closing

Posted by Zach Lowe

After all the screaming over whether--amid its $17 billion acquisition of British confectioner Cadbury--Kraft Foods's move to shutter a Cadbury factory in the U.K. represented a broken promise, British antitrust authorities have ended their inquiry into the matter by hitting Kraft with a verbal reprimand, according to The New York Times. For Arnold & Porter, which handled the antitrust work for Kraft in one of the year's largest deals so far, the verbal slap could certainly be seen as something of a victory.

Susan Hinchliffe and Donna Patterson, the lead Arnold & Porter partners on the matter, did not immediately return messages seeking comment. 

The British Takeover Panel could have levied a fine against Kraft for statements its chair and CEO, Irene Rosenfeld, made about four months before Kraft and Cadbury finalized the deal. At that time, Rosenfeld indicated that Kraft believed it could keep a Cadbury factory in Somerdale, England, that employed about 400 people open even though the chocolatier had already initiated plans to close it.

In a statement released shortly after Kraft announced its talks with Cadbury, Rosenfeld said, "We believe we would be in a position to continue to operate the Somerdale facility," according to the NYT. But shortly after signing the deal papers with Cadbury, Kraft announced it would not be possible to keep the plant running. The move angered British citizens, who were already concerned about a foreign company snapping up one of the U.K.'s corporate jewels. Cadbury was further along the process of closing the plant--and had spent more money--than Kraft understood, according to the NYT.

British takeover law requires that any company statements made during the M&A process must "be prepared with the highest standards of care and accuracy and the information given must be adequately and fairly presented," the NYT says. The panel concluded that Kraft should not have made the Somerdale statements without first learning more about the factory, the NYT reports.

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