Dow Jones Newswires-Wall Street Journal | U.K. regulators are
investigating whether Kraft Foods Inc. misled employees and investors
during its battle to acquire Cadbury PLC, people familiar with the
matter said, as ill feeling generated by the deal continues to
reverberate in Britain.

The Panel on Takeovers and Mergers is looking into comments Kraft
executives made during the contentious takeover battle about Cadbury’s
Somerdale candy factory in Keynshaw. Beginning with its initial
takeover letter, Kraft officials repeatedly said they believed the
factory could be kept open. That was a contrast to Cadbury, which had
said it would close the plant and move Somerdale’s 500 jobs to Poland.

Then last month, after it became clear Kraft had won the takeover battle, the Northfield, Ill., company reversed course and said it will close the plant by 2011.

This week, the panel wrote to Jacob Rees-Mogg, the Conservative Party candidate for Keynsham, where Somerdale is based, to say that it is looking at the accusations, a representative for Mr. Rees-Mogg said Friday.

Mr. Rees-Mogg had written in a Feb. 15 letter to the panel that Kraft, in backtracking on the closure, broke rules that call for bidders to “prepare statements with the highest degree of care and accuracy” and not to make statements that “while not factually inaccurate may be misleading.”

A spokesman for Kraft said in a statement, “Throughout the transaction, it has never been our policy to comment on the U.K. takeover panel. Any questions about the panel therefore should be addressed to the panel itself.”

On Friday, Mr. Rees-Mogg described Kraft’s behavior as “shameful.” “It gave people in Keynsham false hope in its prospectus which was either careless or deliberately misleading,” he wrote in an email.

It is unclear what steps if any the panel could take to punish Kraft should it find the company violated the takeover code, and one person familiar with regulatory procedure said that any sanction would amount to little more than a wrist slap — though it would likely add to negative sentiment surrounding the deal.

U.K. Business Secretary Peter Mandelson has accused Kraft Chief Executive Irene Rosenfeld of failing to inform him in advance about plans to shut the factory, while Conservative counterpart Ken Clarke complained he had been reassured only days earlier that Somerdale would be kept open.

This month, Kraft executives will be called to give evidence in front of a parliamentary committee that is holding hearings on the takeover.

The investigation could prove tricky for Peter Kiernan, a banker at Lazard Ltd. who is set to take over as the head of the Takeover Panel. Lazard was the lead adviser to Kraft and Mr. Kiernan was one of the key Lazard bankers on the deal. A Lazard spokesman declined to comment.