U.K. takeover panel probing Kraft-Cadbury deal

The U.K. mergers and acquisitions regulator should investigate whether Kraft Foods Inc. misled shareholders in its takeover of Cadbury Plc, according to a candidate for Parliament.

Jacob Rees-Mogg asked the Takeover Panel to probe whether Kraft lied about its plans for a candy factory in Keynsham, a town within the district he is seeking to represent for the Conservative Party in North East Somerset, England. Kraft decided to close the plant by 2011 after previously saying it would keep it open.

"I put in a complaint based on the prospectus," Rees-Mogg, the founder of investment fund Somerset Capital Management LLP in London, said in an interview today. "Either they were incompetent in putting together their prospectus or they set out to mislead people. The speed with which they reversed their decision raises questions."

Cadbury, based in Uxbridge, England, agreed to be sold to Kraft for 11.7 billion pounds ($17.6 billion) after a five-month stand-off, creating the world's largest confectionary company.

The Takeover Panel would "feel duty-bound" to look into the deal if they were asked, said Robert Adam, a mergers and acquisitions partner at Baker & McKenzie in London who wasn't involved in the deal.

If the Takeover Panel found Kraft misled shareholders, they are most likely to send a letter of private criticism to Kraft or its advisers, or issue a public statement of reprimand, said Adam, who spent two years working at the regulator.

Private Criticism"I suspect they wouldn't go beyond a public statement," Adam said. "They look at a public statement as a very serious thing. People could lose their jobs over a letter of private criticism, and a public statement is much more serious."The most extreme enforcement power the Takeover Panel could use is "cold shouldering," where City firms and people are told not to work with a person or company that was reprimanded. The tactic is "phenomenally rare," Adam said.The Takeover Panel declined to comment. The panel said last month it would review its merger rules following comments by Business Secretary Peter Mandelson on the Cadbury deal.Mandelson, testifying to lawmakers on Kraft's Cadbury purchase in January, rejected suggestions the government should have more power to block takeover bids. He had faced calls from Labour Party members of Parliament to find a way to block the sale of the British chocolate maker.Mandelson said takeover rules are transparent for investors and that he is reluctant to introduce a public-interest element."Throughout the transaction, it has never been our policy to comment on the UK Takeover Panel," Kraft spokesman Michael Mitchell said in a statement.