An evaluation of impact on financial and operations consequence

An e valuation of impact on mo crystaliseary and ope range theatres consequenceINTRODUCTION Choosing the Topic later completion of all my wake slight text file in August 2010, I waited till the next school term to decide to submit a research and psychoanalysis project for the Oxford Brooke University. The modestness expose for such delay was the pressure to complete three professional papers in December session. This delineate is also important to me beca affair I retrieve by having combination of both Profession qualification and a horizontal surface will uplift my cargoner.To handbag my project on ACCA provided me with a count of 20 recommended things to involve from. After reading finished the list, the topic that in a flash attracted my attention was topic 19 which was The mo winningsary and ope dimensionnal consequences of a nuclear fusion chemical reaction between two organisations or of the learning of one organisation by an early(a). What attracted me the most most this topic was that, it was all very applicable to my studies as I am believeing to result mo interlockingary prudence aft(prenominal) ACCA. I k crude this topic will allow me to try pop and learn the all important, analytical skills. Other reason to choose this topic was the much talked ab proscribed encyclopedism of kraft and Cadbury thitherfore it encouraged me to choose this topic. Another reason was availability of the vast keep down of study done the internet and press release because of recent release of krafts recent quaternary quarter in the month on February 2011. Choosing the organisation Once I chose my topic, I had to choose an organisation to base my research on. I chose kraft and Cadbury for my analysis it was an obvious choice as this was the erudition that impelled me to admit this topic. This was one of the most contr everywheresial and largest coups in the year of 2010. I believed the take everywhere by the 2nd Largest Food Giant s in its industry would accomplish the object I had in mind for the project. Aims Objectives The principal(prenominal) objective of this report is to approximate the consequences of the acquisition on the finance and operations aspect of KRAFT FOODS. The financial records by themselves only provide the quantitative data which need to be analysed by drawn interprets. The chief(prenominal) focus of this report, in that locationfore, is as follows* To analyse the reasons for kraft to make a strategical choice of acquiring Cadbury and whether it satisfy the strategic fit as claimed by the chief operating officer of KRAFT FOODS in represent of financial and wrinkle operations.* The second offend of the research aims to analyse whether kraft paper is on the track to contact its targets it promised its mail serviceholders at the time of acquisition.* Since financial entropy wasnt sufficient for my research, I need to review the strategic decisions do by kraft paper for it s subsidiary Cadbury after the acquisition a far disciplineing with the friction set while integrating both business. The anticipated future of Cadbury chthonian kraft paper Group.In order to achieve the aims mentioned above, I give done soft analysis victimization SFE (Suitability, feasibility Acceptability) and Ashridge stick on with quantitative analysis using financial ratios and linking both to get an overall picture. THE ORGANISTAION Comp whatsoever write kraft paper kraft Foods is the worlds second largest f are federation headquartered in sexual union Field, Illinois manufactures and mart packaged regimen products, including biscuits, confectionery, beverages, cheese, convenient meals and various packaged and foodstuff products.( KRAFT FOODS INC, 2009)The business was formed by James L. kraft paper and his quaternary brothers who began by wholesaling door to door cheese business in Chicago. kraft paper indeed achieved ingathering by merging with other comp anies and increases the size of the business by expanding more product lines.( Wikimedia Foundation,2011) Being listed on NYSE, kraft now has approximately 127,000 employees worldwide. kraft sells products to consumer in approximately 170 countries. At 31 December 2010, kraft had operations in more than 75 countries and do products at 223 manufacturing and processing facilities worldwide. kraft paper portfolio include eleven brands with yearbook imposes particular(a) $1 jillion individually Oreo, Nabisco and LU biscuits Milka and Cadbury chocolates Trident gum Jacobs and Max vigorous put up coffees Philadelphia cream cheeses kraft cheeses, dinners and dressings and Oscar Mayer meats. kraft portfolio included approximately 70 brands which from each one generate annual revenues of more than $100 million. (KRAFT FOODS INC, 2010) CadburyCadbury was a leading world(a) independent business in the exciting world of confectionery, a large, growing, brand-led industry. With a n smashing portfolio of chocolate, gum and dismissdy brands, the largest appear swops business and a focuse and experience team, Cadbury is committed to its long vision to be the worlds biggest and best confectionery comp close to(prenominal). Cadbury operated in more than 60 countries with a workforce of 46000. (Cadbury, 2008)Cadbury made its beginning by opening one single shop by John Cadbury. As time progressed John Cadbury moved into the manufacturing of drinking chocolate and cocoa. Cadbury grew bigger through some organic gain and some mergers. During the first world war Cadbury started to achieve with child(p) success, its products were regarded as necessities and Cadbury were at their peak. Cadbury kept investing in technology, young factories and in raw(a) products to re principal(prenominal) frontwards of competition. With factories all over the world and a host of well known brand enounce it has become a household name in m whatsoever countries. (Birming hamuk, (n.d.)) learning GATHERING Sources of Data Data lav be suck ined for any research by the following ways* Primary Research to a lower place primary research new randomness is compile via interviews, survey or questionnaire etcetera whence information is collected first hand.* Secondary Research besides known as Desk Research is gathered from information which has already been provided unless may not be for the same purpose. Such information are easy to access and are my cheaper than carrying out primary research. Such information gathered should be analysed and screened properly so that it fits for the purpose. kraft and Cadbury both cosmos listed companies although listed in variant countries were required to issue annual accounts for its stakeholders by Sarbanes Oxley and Companies kinfolk respective. These companies especially Kraft issued Interim Reports as per the stock list requirement. thus much of the quantitative and qualitative date was readily available for analysis. wherefore I chose to use secondary data over primary. The only ramification I faced apart from time pressure was obtaining latest financial information for Cadbury (2009 accounts). Fortunately Kraft public relation team co-operated and emailed me 2008 and 2009 Cadbury annual accounts on my request. The following are the kickoffs of secondary information I apply for my projectAnnual and Interim fiscal Accounts and Reports This is the main source I utilise for financial aspect of my business and to draw graphs. I had to use interim reports even to demonstrate impact of Cadbury acquisition on Kraft at each and every quarter ascribable to complexity of the business. Krafts annual accounts were available to view and download on Krafts Investors Website. merely Cadbury financial rehearsal isnt easily available.Internet This is the source of limitless information hence it took me a lot of time to extract information which was relative to the point. Firstly it provide d me the qualitative information which was missing or less in the financial statement of both entities. Secondly it also provided me information from a third company or neutral point of view.Letters and Reports Under this source, I examine the documents sent by Kraft to Cadbury management or reports addressed to Kraft componentholder explaining them the strategic fit of Cadbury acquisition. These documents were available over the internet.Library I used study text published by Kaplan for ACCA to brush my skills and be of aid when I got confused during an analysis phase. Apart from my course books I visited local library for reference books. As I mentioned earlier I didnt had an opportunity to visit British Library for the access of database such as Datamonitor and Mintel. However I was able to get access to Euromonitor through internet and used it as a tool to aid understanding of the coat of analytical tools regarding acquisition and both the entities. Data Collection Methods Its easy to collect data, but skills are required to make sense of data and using it for the purpose. It was a fiddly job to collect reliable authentic information to base my reports on. Any negligence on my behalf may cause me a hardship in achieving the report objectives. I was cautious and took my time to read through all the information once before starting with my project.As this acquisition was of the biggest acquisition in the year 2010, too much was written by the newspapers and media about it. Reading about the merger in 2011 gave me this idea to do a project on Kraft and Cadbury, as Kraft were about to issue its tetradth quarter results. I started my data collection by reading articles from local newspapers as well as papers or journal published in other counties. I viewed them retrospectively. The most turgid newspaper I viewed was Financial Times, Guardian, Reuters, Wall route Journal and Economists.After I got a general idea behind the acquisition and critics claimi ng the acquisition as a failure. I downloaded the fourth quarter as well as annual report. I need to know what did CEO responded on the acquisition as it had been a year. Then I looked at financial data provided to support any statement by the CEO.Internet provided me great deal of help in my project. I type in the keywords such as Cadbury Kraft in etc at www.google.com . Find the relevant articles and do notes as well as bookmarks of the WebPages if I needed to read it over again for qualitative part of my research.I even visited many libraries in my local areas the librarian helped me by giving me advice on referencing as I had no idea on references. Unfortunately I couldnt make a take off to British Library to access database which could help me in my project. But I was pretty content with the amount of information I already collected to carry out my analysis. Referencing I have used the HARVARD REFERENCING SYSTEM for the referencing in my research and to aid readability, I ha ve cited the source below the split up if the whole paragraphs were written based on the same single source. eruditeness for Kraft PreAcquisition To systematic analyse the strategic choice by Kraft to experience Cadbury, I will be using Johnson and Scholes framework (Suitability, Feasibility and Acceptability Model). (Wu, 2010) Suitability Kraft Foods Inc. existence the second largest food company still looks for opportunities to grow and try to remain one of the market leadership in the industry and and to feast risk by a diversify portfolio. Kraft believes in rapid expansion by acquiring other businesses. Kraft surveyed new strategy implemented by new CEO who believed low ingathering segment should be disposed of and take those strategies that will achieve rapid growth even by representation of acquisition .Kraft will look for businesses that will build on its strengths and guide on against its threats. Kraft has a successful track record of acquiring iconic brands and b usinesses and in effect(p)ly using it for its expansion. We will be using one of the criteria of Ashridge model under suitability. Under Ashridge model we will be examining two criteria whether Kraft has sufficient skills, alternatives and understanding of the Cadbury business and whether there are opportunities for helping to achieve critical success factors. (Steiner, 2009)* One key reason for Kraft to acquire Cadbury was to penetrate in those growing markets where Cadbury has good base such as China, India and Mexico. Brands such as Cadbury Dairy Milk dominated such markets by a vast length compared to its rivals. Cadbury did receive 40% of its revenue from prodigal growing emerging market. Cadburys acquisition of Adams played a vital intention to increase their market share in Latin America. Cadbury has experienced 12% growth in revenue in emerging market over five years (EUROMONITOR, 2008) this dejection be beneficial for Kraft as it intends to use Cadbury s distribution network to sell its brands.(Cadbury, 2008)(Cadbury, 2009a) Kraft being aware of Cadbury s heritage and its strong confectionery business be and its iconic brands makes Cadbury orbiculately number one in chocolate, gum and candy. By attaining all these eponymous brands Kraft will become a global powerhouse in snacks, confectionery and quick meals with exceptional portfolio of leading brands in the world. Hence will be one step closer in achieving organic growth objective. Feasibility Under feasibility we would evaluate Krafts moorage before acquisition in term of internal resources of the organization this can even be connected to Ashridge s model criteria of possessing sufficient resource by Predator Company. Kraft being second largest business in its industry has huge cash reserve which reflects in its Cash lam pedagogys of 2008 and 2009 ($1.24 jillion and 2.10 meg respectively). Buts its charge mentioning the disposal of Krafts North American pizza to snuggle for total c onsideration of $3.7 billion contributed majorly to its graduate(prenominal) cash reserve. tall cash reserve helps them to with acquisition speak to and integration cost and any other ab approach pattern cost. Apart from cash reserve Kraft does have reasonable current ratio of 1.04 reflecting its above average liquidity mail service then its peers. Although Cadbury has a strong hold on overall emerging markets Kraft have a greater dumbfound in some markets such as brazil and Russia. As Kraft being a huge conglomerate business it has vast amount of resources in terms of specialist staff, a passing invested research and development teams and finance etc to binding up Cadbury to face competition from other rivals such as Hershey and Mars. Kraft can eve use its power over major supermarket bonds such Wal-Mart to increase shelf value of Cadbury as majority of its gross gross revenue come from small convenient store. Kraft is even able to come along Cadbury heritage brand more rigorously receivable to available of gigantic resources. It would be worth mentioning the fact that billion dollar Kraft conglomerate has been experiencing an average growth of impressive 5 % over period of four years to 2008 (where it achieved 13% growth than prior year).(Daltorio, 2009) Acceptability To carry on with a strategic choice it also need to be unimpeachable by the stake holders. As shareholders are key stakeholders their consent is highly important. Although Kraft assured them the acquisition would result in increase in shareholders wealth as it fits in into its business culture, some shareholders have different opinion. One of the reasons for such conflict of touchs is the fear of increase in companys gear. By 2008 Kraft had a high gearing of 1.34 (ratio) compare to its rival nest of (0.36). They fear by acquiring Cadbury, Kraft would issue more long-term debt that may adversely affect the gearing ratio and hence increase the financial risk of the business and touching the capability of paying out dividends, hence damaging shareholders interest. The other reason for conflict of interest was the reaction from one of the biggest shareholders warren Buffett of Berkshire Hathaway who regarded the acquisition as bad deal .He believed Kraft has overvalued Cadbury for purchase consideration and the disposal of pizza business to Nestle for $3.7 billion was a mistake. He firmly believed Kraft is paying high reward for the acquisition. One shareholders view didnt affected Krafts strategic choice and Kraft went ahead with the acquisition despite got rejected first time. (Barr, 2010)Ballast lineagees*CADBURY* Heartland BusinessesAlien BusinessValue trap BusinessAccording to my analysis I think Kraft values Cadbury as Heartland Business as Kraft has the skills to work opportunities from Cadbury. (UNDER ASHRIDGE MODEL) ACQUISITION for Kraft The long clashing 5 month contend between Cadbury and Kraft was finally over on 2nd February 2010 as Kraft clinches control over Cadbury by 72% holding. Kraft then took total control of Cadbury on June 2010. Cadbury shareholders had a deadline of 2nd February to accept Kraft offer of 500 pence in cash for each Cadbury share and 0.1874 new Kraft shares for each Cadbury share which altogether values each Cadbury share at 840 pence including a special 10 pence dividend. This sums up the total valuation of Cadbury business to approximate of 11.9 Billion ($19.4 Billion). Kraft offered this purchase price on 19th of January after a long negotiation with Cadbury management. Kraft assay to make hostile takeover on 7th September by a sport worth 300 pence in cash and 0.2589 new Kraft shares for each Cadbury share (valuing it 745 pence a share). However Cadbury rejected the bid immediately and regarded it derisory. Kraft sweetened the bid by fostering the original offer and increasing the cash component from 40% to 60% to make it more appealing for Cadbury shareholders. (Cimlluca et al, 2010) I have extracted this graph from Thomson Reuters to illustrate the impact on the share price for both involved parties after the announcement of take-over. We retrieve an increase of almost 40% in the market value of Cadbury. The increase in Cadburys share price was triggered by the sign announcement by Kraft of its intention to take over Cadbury in early September of 2009. The announcement was received well by Cadbury Shareholders cause an increase in demand and thereby price of the stock. However we jut a bloodline in the share price of Kraft food at the time announcement (graph below), some analysts believe this was overdue to Warren Buffet dissatisfaction of Kraft Acquisition. He regarded the acquisition as bad deal, which caused booby hatch amongst other shareholder hence a price pegs. This price fall deteriorated the purchase price offered by Kraft which was immediately rejected by Roger Carr, Chairmen of Cadbury.KEY POINTS FOR FINANCIAL ANALYSISKraft foods acquired C adbury plc in February2 2010. Hence Cadbury results are restricted to 10 months rather than full 12 years and its study to fluctuate with moving central rates. Cadbury data was adjusted from IFRS (previously applied by Independent Cadbury) to U.S GAAP followed by its new Parent Kraft Foods Inc. Cadbury previous years figure outs couldnt be compared with unless comparison is made in percentile due to the size deviation of both businesses. Kraft even revised its assoil Revenue retrospectively 2009 onwards. Post Acquisition Financial Perspective The above graph represents s the growth and decline in sales over a period of 4 years by means of percentage. The 2010 information contains data post acquisition, specifically contribution from Cadbury of $9143 that has been converted using the exchange rate of $1.595 per 1.00 for the aid of analysis. It can clearly be noted the reason why Cadbury was so desirable by Kraft. Cadbury attained significant growth from 2007. In June 2007 Cadbur y introduced their Vision into Action plan which insisted in strengthening their attitude in emerging market. This strategy was immediately effective and can be reflected in the graph. As stated earlier in this research report one of the key reasons for Kraft to acquire Cadbury was their better position in emerging market as compared to Kraft. Although Cadbury has just been acquired for 11 months under Kraft we see a marginal fall of 4% in Cadbury sales than its preceding years. This by chance because Kraft perchance getting acquainted to Cadburys operation and network hence not utilizing Cadburys full potential. (Cadbury, 2009a)This graph explains what did Krafts CEO meant by GLOBAL POWER HOUSE. If we examine the two graphs we see a change in the revenue from developing and North American markets. The main reason for Kraft to takeover Cadbury was to derive maximum public assistance of Cadburys strong hold in emerging market. Although Kraft is one of the largest companies in foo d industry it drives more than 57% of its revenue from its Home Market US. As US market is experiencing economic recession Kraft needed to adopt an effective strategy to broaden its operations globally. Hence Cadbury looked more loving from Krafts perspective. Its worth mentioning that Cadbury earns more than 40% from the fast emerging markets portraying its position being better than Kraft.. It should be taken into consideration that fact that Kraft hasnt launched any new aggressive marketing scheme or any strategic step via Cadbury in emerging markets. In 2010 Kraft has continue to run Cadbury operation without devising any major changes. Talking quantitatively Cadbury boosted Krafts net revenue in emerging markets by $3382 million which can be seen clearly in the graph at the bottom. Krafts strengths in Russia, Brazil and China along with Cadbury great position in United Kingdom, India and Mexico has spread its revenue source which has reduce the risk of a recession affecting K rafts sales .By acquiring Cadbury Kraft enhanced its distribution channel which became effective in the first year of acquisition and clearly be seen in the 2010 net revenue segments. In 2010 revenue from US market contributed less than 50% to Total Net Revenue minimizing the business risk control by recession. (Farrell et al, 2010)The above illustrated graphs represent the change in Krafts revenue source after the acquisition of Cadbury. Krafts adopt a rational approach and pursue the strategy of selling off less gatherable brands and achieving quick growth by acquisition. Kraft faced fierce competition from private label companies in the cheese and packaged meat market. Therefore Kraft acquired Cadbury to several(a) its revenue source as there were dangers of fall in revenue from its main segments. There is an increase of 16% in the contribution made by confectionery segment. This segment is a high potential growth segment and Kraft would like diverse its business risk by inves ting more in promotion of this segment. (Trefis, 2011)The Gross margin shows the amount of gross turn a returns generated by the company as a percentage of the sales revenue. Kraft Gross Profit Margin has been plotted against each quarter from 2009.It can be analyzed by the graph that Kraft tried to maintain its Gross Profit Margin in mid(prenominal) 30s percentile despite economic downturn in US market and increase in raw materials Kraft is able to maintain its objective, the main grounds for such level gross profit margin was the acquisition. By acquiring Cadbury Kraft has widen its distribution network as Cadburys main selling networks are convenient stores open on High Street therefore reach of every individual.Talking in respect on cost of sales (100 Gross Profit Margin) Kraft will benefit from economies of scale especially regarding purchases as Kraft will be mass buying and using Cadbury suppliers rationally to minimise cost of sales as possible. (Szalai, 2011)Net Profit Margin is an indicator of profitability, calculated as net income or net profit divided by net revenue.As shown by the graph, we see a downward trend in the net profit margin against each quarter in 2010.Despite the fact that there has been a 27% increase in Net Revenue in 2010 as compared to its preceding year, we notice a fall of 23% in net profit especially in the fourth quarters of 2009 and 2010 ($711m and $547 respectively. However in aggregate there has been an increase in the net profit from 2009. The major reason for such deteriorates result for the fourth quarter was the cost associated with integration between Kraft and Cadbury. The pizza business of Kraft did contributed to the net profit in 2009 , by the sale of its pizza business to Nestle ,Kraft has deprived itself from the arbitrary contribution of its disposal component.(BBC, 2011)The Prime objective of making investment in any business is to obtain satis pulverisation settle on smashing invested. Hence, the retur n on outstanding employed is used as a measure of success of a business in realizing this objective. Return on capital employed establishes the relationship between the profit and the capital employed. It is used to show the overall profitability and efficiency of the business.By analysing we see a fall in return on capital employed although the sales and net profit overall has increased and it hasnt increased by the proportion of investment made by KRAFT FOOD. As Mr. Warren Buffet feared that Kraft did overpay for the acquisition this can be reflected in diminish of return on capital employed. I have also included a graph showing fall in earning per share that illustrate the point of less return for the investors this maybe due to issue of new share to Cadbury shareholders. (Wilson , 2010)I have included this graph in my research report especially to breakdown the positive and negative contribution made by Cadbury to Kraft operating income in 2010 as compared to Kraft in 2009. A s announced by CEO of Kraft Foods, Kraft is highly likely to expect $1 billion in incremental revenue synergies apart from $750 million in cost saving by 2013. In order to achieve the synergies Kraft has budgeted to flatten $1.5 billion in the first three years following the acquisition to combine and integrate the two businesses and already incurred $657 million in 2010. As stated in Kraft Annual Account 2010, Kraft incurred and expensed action related fees of $218 millions in 2010 and $40 million in 2009.Kraft has recorded the mentioned be under selling, general and administrative expenses in Profit and Loss Statement (Statement of Comprehensive income). However in the above graphs include figures which has been given in the Kraft 2010 annual accounts analysis of operating profit rather than authentic incurred cost as some cost have been taken under finance cost which hasnt been included in arriving at operating profit for 2010. This seems a draw back in the acquisition object ive and maybe criticizes by its stakeholders as integration cost has reduced Krafts earning by 33%.(BBC, 2011) Liquidity ratio expresses a companys ability to repay short-term faithors out of its total cash. The liquidity ratio is the result of dividing the total cash by short-term borrowings.This Graph represents the two liquidity ratio one normal current ratio and another quick test ratio. Unlike menstruation ratio, quick ratio focus on the most liquid assets hence it exempt inventory from current asset while calculating ratio. somewhat of the key points that need to be addressed before analysis of the graph are the disposal of the pizza business and all the works capital relating to it. We should also account for the current assets and current liabilities acquired by Kraft such as Net Receivable of $ 1333 m and Accounts Payable of $ 1605 m etc. Another point to be mentioned is that while calculating Quick ratio I havent excluded the deferred tax asset, while some analyst exclud e deferred tax asset as they dont regard it liquid.We see a significant difference between both ratios as inventory has occupied much of the working capital. Comparing it to the last year it is almost consistent with the growing sales. We notice a slight deterioration in both the ratio of 2010. The $3.7 billion cash raised by disposal of the pizza business was used to pay cash component of the acquisition. The rise in the actually figure is in line with the growing and diverse sales (Kraft Foods Inc, 2010)Gearing proportion is a measure of financial leverage, demonstrating the degree to which a firms activities are funded by owners funds versus creditors funds (investopedia).The above graph represents how much company has borrowed compare to equity raised by KRAFT FOODS.Kraft had issued a long term debt of $9.379 billion (net proceeds) to support the cash component of Cadbury of acquisition along with proceeds from Pizza Business. Kraft even made a repayment $2.1 billion of long ter m debt during the year. This has increased the total debt of the business from $18990 million to $28724 Million.Kraft has also issued 262 million shares to existing Cadbury shareholder as part of purchase consideration. This has enlarged Krafts share capital affecting the gearing ratio.By taking into consideration the above mentioned circumstances, we see an increase in the gearing ratio of 7%. This may cause some concerns amongst shareholders and lenders of Kraft as the financial risk of the business has increased as more interest will be paid from the profits available to pay dividends to shareholders. (Tradition Financial Concept.). This may even damage the creditability of KRAFT FOOD in lenders market as it has borrowed 80% to Equity, hence it may be charged high interest rate by the lenders in future. (Kraft Foods Inc, 2010)(Hoskins, 2010)Interest cover is a measure of the adequacy of a companys profits relative to interest payments on its debt. This ratio will help to explain the previously mentioned financial due to increase in gearing.Due to the increase in leverage we see a fall of 0.94 in interest cover which means there would be less profit available for dividends. This maybe is one of the reasons why Warren Buffet (one of the major shareholder in Kraft) reduced its stake from 9% to 6%. The ratio is over 2 which is considered strong by analyst and reflects Krafts strong position in borrowers market. However Fitch, one of reputed credit rating agency, has downgraded the default rating on both companies to BBB-. However its rivals havent downgraded the rating as yet but our reviewing if they should follow their peers. Flitch has downgraded the rating due to anticipated increase in financial leverage of the combined Kraft/Cadbury. (Peters et al, 2010) Operational Changes Post Acquisition The significant changes in operations along with their impact on KRAFT FOOD GROUP as a whole Closure of Somerdale factory Days after acquisition Kraft announced the cl osure of Cadbury factory in Bristol. During the acquisition struggle, Kraft pledged to retain Somerdale Factory. The announcements created a chaos amongst Cadbury workforce and British Unite trade union as 400 employees were being made redundant. It would be worth mentioning Cadbury prior to its acquisition (in year 2007) had already announced the closure of its Somerdale factory as they had invested more than 100million in the production plant