Thursday 21 January 2010

Cadbury #2

Kraft had to seek funding to allow it to put in an acceptable bid for Cadbury – that is, a bid so huge that Cadbury shareholders will find it almost impossible to reject when they meet to discuss it. Some of the shareholders are expressing doubts and fears but will have to abide by the majority decision. It is safe to assume that it is a done deal.

Banks will not always lend money if the risk is considered too great. However, the Royal Bank of Scotland (RBS) has no such qualms. It has lent the money to Kraft. About a year ago RBS had to be bailed out by the British government because it was in danger of collapsing. Now, secure once more thanks to the British taxpayer it feels confident that it can conduct business effectively, efficiently and profitably. (Who will profit is a moot point.)

So the situation is this: RBS, shored up by British taxpayers, has lent money to the American company Kraft so that it may buy the British company Cadbury. The banker/s who secured the deal will undoubtedly receive a very handsome bonus no matter what happens subsequently to Kraft/Cadbury. Am I the only one who finds this very odd?

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