kraft cadbury final2010

8/8/2019 Kraft Cadbury Final2010

1/16

Kraft foods acquisition of Cadbury


2/16

KRAFT FOODS OVERVIEW

NYSE: KFT

Ranking :Worlds second largest food company after nestle.

Brands available in 150 countries.

Headquarter: Chicago, Illinois.

Employees Approximately 100,000

2009 Revenues $40.4 Billion.

The firm has two main operating units-Kraft Foods North Americaand Kraft Foods International

Of its brands, more than 40 are at least 100 years old, nine brandshave revenue exceeding $1 billion and more than 50 additional

brands have revenues greater than $100 million.

2


3/16

CADBURY PLC OVERVIEW

NYSE: CBY

Ranking: One of the world's largest confectionery companies with

No. 1 or No. 2 positions in more than 20 of the world's 50 biggest

confectionery markets.

The largest and most broadly spread emerging markets business of

any confectionery company.

Headquarter: Uxbridge, London

Employees: 48,000.

2009 Revenues:$9.5 Billion

Has operations more than 60 countries. The companys business is

split into seven international units. 3


4/16

CADBURY KRAFT

SIZE 2nd largest confectionery coafter Mars -Wrigley

Worlds 2nd largest food group,after Nestle.

BRANDS AND

PRODUCTS

Dairy milk and Roses

chocolates, Trident gum andHalls cough drops.

Oscar Mayer hot dogs, Maxwell

house instant coffee, Milka,Toblerone and Tang.

REVENUE IN 2009 $9.5 billion $40.4 billion

EMPLOYEES 46000 98000

FOUNDED IN 1824 1903

HEADQUARTERS Uxbridge, London Northfield, Illinois

CEO Todd Stitzer Irene Rosenfeld


5/16

Strategic Rationale

DevelopingMarkets

Growth

Categories

Growing

Channels

Margin

Explosion

A company with approximately $50 billion in revenues.

A global powerhouse in snacks, confectionery and quick meals.

Exit low growth, low margin businesses.

Geographically diversified combined business, with leading

positions and significant scale in key developing markets

including India, Mexico, Brazil, China and Russia.Capitalize on popular growth trends.

Strong presence in instant consumption channels in both

developed and developing markets, expanding the reach and

margin potential of the combined business.

The potential for meaningful revenue synergies over time frominvestments in distribution, marketing and product

development.

In addition, there is a significant opportunity to realize pre-tax

cost savings.

Improve portfolio mix.


6/16

Kraft foods position as global sweet

snacks leader


7/16

THE DEFENSIVE TAKEOVER BIDTIMELINE

August 28th, 2009 Krafts CEO and Chairman Irene Rosenfeld proposed

outline to Cadbury Chairman Roger Carr of the takeover deal comprising

300 pence in cash and 0.2589 new shares.

September 7th Kraft goes public and offers 745 pence, a 31% premium

over Cadbury last trading price at 568 pence.

September 16th Warren Buffet makes Kraft strategy difficult.

December 4th Kraft gives a further lower valuation at 713 pence per

share.

January 5th, 2010 Kraft restructures bid at 770 pence but reduces the

number of new shares offered.

January 19th Kraft agrees deal to buy Cadbury at USD 19.55 bn .


8/16

Terms and Conditions

Cadbury Security holders will be entitled to receive:

For each Cadbury Share 500 pence in cash and 0.1874 New KraftFoods Shares

For each Cadbury ADS 2,000 pence in cash and 0.7496 New KraftFoods Shares

Representing, in aggregate, 840 pence per Cadbury Share and GBP33.60 per Cadbury ADS.

In addition, Cadbury Shareholders will be entitled to receive 10pence per Cadbury share by way of a Special Dividend following the

date on which the Final Offer becomes or is declared unconditional.

The Final Offer represents an attractive multiple of 13.0 timesCadbury's underlying 2009 EBITDA.


9/16

Some terms

The Final Offer does not require the approval of Kraft Foods

Shareholders. Accordingly, the condition relating to such approval,

as set out in the Original Offer Documents, is treated as satisfied for

the purposes of the Final Offer.

Full acceptance of the Final Offer will result in the issue of 265

million New Kraft Foods Shares, representing approximately 18 per

cent. of the existing issued share capital and 15 per cent. of the

enlarged issued share capital of Kraft Foods.

The Final Offer will remain open until further notice and at least 14

days' notice will be given if Kraft Foods decides to close the Final

Offer. Cadbury Security holders who have not yet accepted the

Offer are encouraged to do so without delay.


10/16

Some terms cntd.

Level of acceptances

As at 1.00 p.m. (London time) on 2 February 2010, Kraft Foods had

received valid acceptances of the Offer in respect of a total of 987,684,041

Cadbury Shares (including those represented by Cadbury ADSs),

representing approximately 71.73 per cent. of the existing issued sharecapital of Cadbury.

Delisting and re-registration

Following receipt of sufficient acceptances (i.e. 75 per cent.), Kraft Foods

intends to procure that Cadbury will apply for the cancellation of thelisting of Cadbury Shares on the Official List and the trading on the London

Stock Exchange for listed securities.

It is also proposed that, after Cadbury Shares are delisted, Cadbury will be

re-registered as a private company


11/16

Criticism WARREN Buffett has slammed the much coveted Kraft Cadbury deal. Buffet

who is the world's most successful investor and owner of 9.4 per cent ofKrafts shares has condemned the 11.9 billion acquisition of Cadbury. Hewas quoted as saying Its a bad deal. he was given a chance to vote on thedeal, he would vote for a no

The credit rating agency Fitch has also lowered the credit rating of both firmsto reflect the merged company's huge debt burden.

Some quarters in the media have also raised doubts that Kraft Foods mightsacrifice the high quality standards observed by Cadbury, now that it willhave to cut costs to pay of the debt burden.

The Unite union said it was a "very sad day for U.K. manufacturing" and thatit remained worries about the future of 7,000 workers in the U.K. andIreland.

Cadburys second-largest shareholder, Legal & General, issued a statementsaying the final price did not fully reflect the long-term value of thecompany and that it was disappointed management had recommendedthe offer for an iconic and unique British company.

Protest by workers.


12/16

Ratios (Pre & Post Acquisition)Leverage Ratios Before Acquisition After Acquisition

Long term debt Ratio 0.4106 0.4632

Debt equity ratio 0.6966 0.8630

Total debt ratio 0.6121 0.6429

Times interest earned ratio 1.9960 1.9327

Liquidity Ratios Before Acquisition After Acquisition

Net working capital to totalassets ratio 0.0144 0.0171

Current ratio 1.0838 1.1049

Quick ratio 0.6986 0.7247

Efficiency ratios Before Acquisition After Acquisition

Asset turnover ratio 0.1833 0.1183Inventory turnover ratio 2.0183 1.4183

Profitability Ratios Before Acquisition After Acquisition

Net profit margin 0.0581 0.1664

Return on assets 0.0292 0.0262

Return on equity 0.0274 0.0551


13/16

Expected Synergies

Global Powerhouse

Geographical footprint

Portfolio of more than 40 confectionerybrands

Increased Investment In Cadburys Iconic

brand


14/16

Financial Effects

Incremental Revenue

Revenue growth of 4% to 5% Cash EPS by $ 0.5 in 2011

Long term EPS growth rate 9-11%

Annual cost saving of $675


15/16

Global leader


16/16

Criticism and Risk Analysis

According to Warren Buffet Kraft has

overvalued the price of Cadbury Global chocolate consumption has fallen

Issue of debt has caused low rating to Kraft