Royal Bank of Scotland failed until the eleventh hour to inform long-standing client Cadbury it had decided to offer its backing to US rival Kraft, which has launched a hostile £9.8bn bid for the British chocolate maker.
The state-controlled bank has already been criticised for lending its support to an overseas takeover attempt that could damage the UK economy in the long-term if it involves job losses and the leeching of confectionery expertise out of the country.
The Observer has learned that despite having had a relationship with Cadbury stretching back a number of decades, RBS did not tell the chief executive, Todd Stitzer, of its planned defection until the very last minute, allowing rumours of its planned action to infiltrate the market. Its method of communication is in contrast with the protocol followed by other banks, which all held conversations with Cadbury in advance.
Royal Bank's behaviour in the Cadbury bid is causing a growing controversy. Khalid Mahmood, a Labour MP, has written to the chancellor, Alistair Darling, stating that the first priority of the bank, as a state-controlled entity, should be to support British businesses.
Vince Cable, the LibDem treasury spokesman, said: "It's a scandal: this is not what a nationalised bank should be doing." He contrasted RBS's enthusiasm for backing Kraft's bid with the shortage of lending to Britain's small and medium-sized firms, which threatens to derail economic recovery. Cable believes risky "casino" activities, such as investment banking, should be split off from day-to-day "utility" banking, with only the latter receiving the government's backing.
Trade union Unite, which represents Cadbury workers, has also expressed concern about the bank's role in the possible takeover, particularly since Kraft has so far failed to give firm commitments on job losses or plant closures.
Stitzer refused to comment. City observers, however, said it would be surprising if the handling of the affair by RBS had not created a "bump" in its relationship with Cadbury. "Banks do this sort of thing, but in this case the handling and the communication leave something to be desired," said one.
Sources at RBS insisted that it would have breached a confidentiality agreement with Kraft if it had given Cadbury more notice of its intention to bankroll the bid, adding that lucrative investment banking is likely to provide taxpayers with a healthy profit. According to reports, Kraft has signed exclusivity agreements with its lenders that would prevent the banks that are advancing it a £5.5bn bridging loan facility from financing any rival bidders.
The US maker of Toblerone now has until 7 December to publish its official offer document, which would then trigger a 60-day bid timetable under UK takeover rules. Ferrero and Hershey would have until early February to come up with a joint counter-offer, or Hershey may make a solo bid.
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