While researching into the activities of Vale, Brazil’s multinational mining company and the world’s largest iron ore producer, I was interested to read about the company’s diversification strategy since 2000. One step on the road to successfully implementing these plans was the takeover of a key mining company, Inco – a firm based in Canada. As well as tracking the development of a global business from its base in one of the fast-emerging economies, this acquisition was notable as it involved Vale making significant pledges to the Canadian government. This made me wonder why the experience of the UK was so different in the case of Cadbury’s takeover by Kraft.

Vale began as a state-owned Brazilian company in the 1940s, when it was called Companhia Vale de Rio Doce (CRVD). The firm was based in what is known as the ‘Iron Quadrangle’, within the Minas Gerais region of Brazil. It was privatised in the late 1990s and began to focus solely on its mining activities, consolidating the country’s iron ore industry and diversifying into other mining products. In 2006, CVRD bought a majority stake in Inco, Canada’s second largest mining firm for almost $19bn.

The acquisition made CVRD the world’s biggest nickel producer, but importantly for our story it also involved the Brazilian firm making certain pledges to the Canadian government. CVRD agreed:

• to base its nickel business in Toronto, with a Canadian senior management team and chief
• to continue to invest in the former company’s Canada operations
• not to lay off any Canadian workers for three years

The story of CRVD, which became Vale in 2007, contrasts sharply with the case of Kraft’s takeover of UK chocolate producer, Cadbury. Last week, news emerged that the US food firm was refusing to extend its pledge to protect jobs at Cadbury. Its assurances on other issues were less than definitive. I have traced this story on this blog, noting in particular the broken promises made by Kraft over the future of Cadbury’s former Somerdale factory in Keynsham, near Bristol. In light of these let-downs, the UK parliament’s business select committee was understandably keen to see Kraft keep and extend its promises made subsequently.

Kraft’s pledges also involved (see Section 3, page 14 onwards of this PDF), retaining the Cadbury brand, its UK base, making no more compulsory manufacturing redundancies and no more plant closures, as well as maintaining its UK R&D facilities. The select committee will be focused on holding the firm to these assurances and has talked of the further damage to Kraft’s reputation and brand likely to result from failure to adhere to them.

Kraft has been keen to benefit from Cadbury’s brand strength in the UK and European confectionery market, just as Vale took advantage of Inco’s strong position in nickel. It seems, though, that the Brazilian miner has a better track record of keeping its promises. Or is it just that Canada’s takeover rules protect its own national interests better than those in the UK?