Kraft Taken by Cadbury

8/14/2019 Kraft Taken by Cadbury

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RAFT TAKESOVER CADBUR


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INTRODUCTION

LONDON/CHICAGO (Reuters) - Kraft Foodssealed a friendly deal to buy British candymaker Cadbury for about $19.6 billion (11.9billion pounds) after frantic last-minute talksbroke an impasse over price.

The deal would create the world's biggestconfectioner, and analysts see little likelihoodof a counterbid.

Shareholders are also set to get a 10p special

dividend, bringing it to a total of 850p. It marks the largest European food and

beverage deal on record, according toThomson Reuters data.

Acceptances of the Final Offer would be received

to KRAFT from CADBURY no later than 1.00 p.m.(London time) / 8.00 a.m. (New York time) on 2


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KRAFT

Kraft is the largest food company in theUnited States and holds the number twoposition worldwide, behind Nestle.

The firm has two main operating units-Kraft Foods North America and KraftFoods International.

Kraft's brands bring in more than $1 billion

in revenues each year.


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The company holds the top globalposition in 11 product categories:coffee, cookies, crackers, cream

cheese, dessert mixes, drypackaged dinners, lunchcombinations, powdered softdrinks, process cheese, salad

dressings, and snack nuts. Kraft Foods' products are made at

more than 220 manufacturing

facilities around the world and aresold in more than 140 countries.


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HISTORY OF CADBURY

Cadbury, the global leader in theconfectionery market, began in1824 when a young Quakernamed John Cadbury opened upa shop in Birmingham.

Till 1842 John was selling 11 kindsof cocoa and 16 kinds ofdrinking chocolate.

Cadbury manufactured its firstmilk chocolate in 1897.

The next year Cadbury mergedwith JS Fry & Sons, a past

market leader in chocolate.


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In 1969 Cadbury merged withSchweppes to form CadburySchweppes.

Today Cadbury Schweppes is thelargest confectionery company inthe world, employing more than

70,000 employees. In 2006 thecompany had over $15 billioninoverall sales.

Th i i li d i K ft i iti l


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The premium implied in Krafts initialproposal was low and has since been

eroded

KraftSince Kraft madeits initial

,proposal itsshare price has

%,fallen 5reducing thevalue of its

%.offer by 3

- %Kraft s share

price

/adbury market,In the same periodequity markets

and share pricesof Cadbury s

peers have risensubstantially and

Cadbury hasannounced its

.strong results

+ %Cadbury s share

price+ %1Cadbury peer group

f d db i


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Kraft and Cadbury actionsin relation to the Offer to

date On 28 August 2009, Irene Rosenfeld, Chairman and ChiefExecutive Officer of Kraft, met with Mr. Carr, following arequest for such a meeting from Irene Rosenfeld. At thismeeting, Ms. Rosenfeld proposed a business combinationbetween Cadbury and Kraft.

Kraft was prepared to offer 300 pence in cash and 0.2589new Kraft Shares per Cadbury Share. The possible offervalued each Cadbury Share at 755 pence.

After the Board had given Krafts proposal carefulconsideration, Mr. Carr sent a letter to Ms. Rosenfeldinforming her that the Directors rejected Kraftsunsolicited proposal on the grounds that it wasunattractive and fundamentally undervalued the Group.


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On 7 September 2009, Kraft released a pressannouncement in accordance with Rule 2.4 of the CityCode setting out the terms of a possible offer forCadbury and Ms. Rosenfeld addressed a letter to Mr. Carr

asking him to reconsider Cadburys rejection of thepossible offer.

On the same day, Cadbury released a response statementconfirming Cadburys rejection

On 9 November 2009, Kraft announced its firm intention tomake the Offer in accordance with Rule 2.5 of the CityCode.

On the same day, Cadbury issued an announcement statingthat the Board had emphatically rejected the Offer andthat it recommended that Shareholders also reject theOffer.

On 4 December 2009, Kraft formally made the Offer byostin the Offer Document and filin the US Offer


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INTERESTING FACTS OFCADBURY

Cadbury was the first company to includepictures instead of printed text onchocolate boxes.

George Cadbury didnt want to take mothersaway from their children, so he developeda company rule that women had to leavework when they got married.

Each married woman was given a bible anda carnation as wedding gifts.

So many children joined CadburysCococub Club that it had 300,000 membersin 1936.

Cadbury launched a Get Active program in


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CADBURYS BID FORINDEPENDENCE

Cadbury will release its penultimate defencedocument in which it will emphasise strongChristmas sales and an improving outlook for 2010

as it seeks to convince shareholders to reject Kraft's10.5billion takeover offer.

The chocolate-maker is expected to say it hasbettered its target for 5 per cent sales growth over

the festive season in a broad-ranging rejection ofKraft's cash and shares offer.

Desperate to see off Kraft's original offer, thecompany was granted permission from the TakeoverPanel to present a two pronged defence because itsresults will be crucial to makin u the minds of


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.PROPOSAL OF

COMBINATION WITH

CADBURY. On 7 September 2009, Kraft Foods announced that theysent a letter to the Board of Directors of Cadbury plc todiscuss the possibility of combining two companies.

Although the Board of Cadbury plc has rejected thisproposal, Kraft Foods is committed to working toward arecommended transaction and to maintaining aconstructive dialogue.

Kraft Foods is proposing an offer for Cadbury of 300 pencein cash and 0.2589 new Kraft Foods shares per Cadburyshare.

This values each Cadbury share at 745 pence and valuesthe entire issued share capital of Cadbury at 10.2billion.

The combination would build on Kraft Foods' position as aglobal powerhouse in snacks, confectionery and quick

meals with a rich portfolio of iconic brands


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This proposed combination wouldcreate:

A company with approximately $50 billion in revenues

A global powerhouse in snacks, confectionery andquick meals with an exceptional portfolio of leadingbrands

A geographically diversified combined business, with

leading positions and significant scale in keydeveloping markets including India, Mexico, Brazil,China, and Russia.

A strong presence in instant consumption channels in

both developed and developing markets, expandingthe reach and margin potential of the combined


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CADBURY REJECTS KRAFTSPROPOSAL

Kraft Foods Inc. proposed a $16.7bn billiontakeover of Cadbury PLC, but the offer wasimmediately rejected by the British maker ofchocolate, gum and candy

Cadbury said the offer undervalued the company,and expressed confidence in its "standalonestrategy and growth prospects as a result of itsstrong brands, unique category and geographic

scope. Cadbury has 28.4 percent of the world gum

market, Kraft has 0.1 percent.

Cadbury has a 10.3 percent share of the world

confectionary market in 2008, second only toMars Inc. with 14.8 percent. Kraft was fifth at


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Cadbury has a 10.3 percent share of the worldconfectionary market in 2008, second only to MarsInc. with 14.8 percent. Kraft was fifth at 4.5 percent.

Cadbury, nearly tripled its net profit in the first half ofthe year as the company pocketed a big gain fromthe sale of its beverage business and chocolateconsumption rose which kraft couldnt do.

Krafts offer completely misses the value which

CADBURY has already created. Cadbury expected that the next phase of Vision

into Action which was to deliver improvedrevenue growth, enhanced profitability andhigher cash returns couldnt have been possible

if kraft would have takeover.


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How they stack up

CADBURY KRAFT

SIZE 2nd largest confectionery coafter mars -wrigley

Worlds 2nd largestfood group, afternestle.

BRANDS ANDPRODUCTS

Dairy milk and roseschocolates, trident gum and

halls cough drops.

Oscar mayer hotdogs, maxwell house

instant coffee, milka,toblerone and tang.

REVENUE IN

2008

$8.8 billion $42 billion

EMPLOYEES 46000 98000FOUNDED IN

HQ

CEO

1824

Uxbridge , london

Todd stitzer

1903

Northfeild , illinois

Irene rosenfeld


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REVENUE OF CADBURYPRODUCTS

6%3%

21


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KRAFT REVENUE DISTRIBUTION

ChocolateGum Candy

United Kingdom 35% 9%

23%USA 34% _ 10%

Australia 48% 20%France 48%

21%

Canada 15% 45%22%


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KRAFT

20%


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CADBURY

62%


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Cadbury agree $19.5 bndeal

After months of fierce resistance, Cadbury'sabout-face to accept a sweetened 11.5billion pound, or $19.5 billion, takeoverfrom Kraft Foods Inc. forming the world's

biggest candy company

Deal will make worlds largest chocolatemaker, 2nd biggest gum producer

The deal, comprising 500 pence cash and0.1874 new Kraft shares for each Cadburyshare, is a 9 percent premium to itsprevious 770 pence offer and 50 percent


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Buffet against this deal

Buffet is the chairman of Krafts biggestshareholder- Berkshire Hathaway. I have a lot of doubts, Mr. Buffett said, adding

that he would vote against the bid if he had thechance.

Mr. Buffett warned Kraft against overpaying forthe UK company earlier this month, and votedagainst its original plan to issue 370million newshares to pay for the deal.

Despite his view that Kraft paid too much, Mr.Buffett said he won't be selling his stake in thecompany, best known for its cheese slices andMaxwell House coffee.

He said doing so was writing Cadbury a blank

cheque because Krafts stock is undervalued.


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DEAL PRICE TRACKER


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T h e d e a lw o u ld b e th e b ig g e st d e a le ve r sig n e d

.in th e E u ro p e

It w o u ld b e n e fit th e sh a re h o ld e rs o f C a d b u ry

g iv in g h ig h e r sh a re p rice s a s w e ll a s th e

.sh a re h o ld e rs o f K ra ft

O v e ra ll C a d b u ry g o t a v e ry g o o d p rice fro m

.K ra ft a s sa id b y W a rre n B u ffe t

it w o u ld b e su re ly b e d ifficu lt fo r K ra ft tom a in ta in th e sta n d a lo n e p o sitio n o f C a d b u ry in

.the m arket

..S a y b ye to C a d b u ry a n d w e lcom e K ra ft

Documents

Kraft Taken by Cadbury