Kraft and Cadbury Acquisition

Presented by

Hemanth K Shenoy G

Cadbury

• Started by John Cadbury

• In 1824 Birmingham England.

• Head quartered in Cadbury house in the Uxbridge business park in Uxiberge, London

• Started production In 1905

• In 1969 Cadbury group merged with Schweppes

• Taken over by Kraft foods on 19 Jan 2010

Kraft food

• Kraft was founded in 1903 as J.L. Kraft & Bros.

• After a number of mergers and acquisitions J.L. Kraft & Bros became Kraft General Foods.

• In 1995, during restructuring, Kraft and General Foods were amalgamated into Kraft Foods, Inc and Kraft General Foods International became a subsidiary of Kraft Foods, Inc, which was renamed Kraft Foods International, Inc

• In 2001, Philip Morris offered an 18.1% stake in Kraft Foods Inc. to the public and the shares were listed on the New York Stock Exchange for public trading. The same year, Philip Morris put forward a proposal for a change in name to the Altria Group, Inc.

• The proposal was accepted and the name was changed in 2003. In March 2007, the Altria Group spun off Kraft and, as a result, Kraft began to trade as a fully independent company. In 2007, Kraft acquired the Paris-based global biscuit group Danone. The acquisition of Danone's business added a lot of diversity to Kraft...

• World’s second largest food company after Nestle with presence in more than 150 countries

• Headquartered at Northfield, Illinois, US

• Famous Brands include - Philadelphia cheese, Oreo biscuits and Trident gum

• "Cadbury has got a good price for the business and Kraft will get a very good return. Our strategy was very clear. We put in an offer in September, but we knew that it would take an eye wateringly high price to get Cadbury to the table. We opted to play a slow game."

An adviser of Kraft Foods Inc., in 2010.

• "If I had a chance to vote on this, I'd vote no. [Irene Rosenfeld] thinks it's a good deal; I think it's a bad deal."

Warren Buffet, Chairman of Berkshire Hathway, Inc. in 2010.

Kraft bought Cadbury for US$19.7 billion

Reason for the dealKraft which wanted to become a global market leader in

confectionery and chocolate markets.

Entering Emerging market through cross border Acquisitions

Overcoming Entry Barriers in New Markets

Increased Market Power

Economies of scale

Cost optimization

Expectation of better return

Knowledge sharing

Strategies to win the deal

• For the year ending 2007, Kraft's cash balance was US$567 million on the balance sheet

• it reached US$1244 million in 2009 with a growth rate of 119.4%.

• This encouraged the company to think in terms of acquiring Cadbury.

Synergies of the deal• Kraft's management was expecting the merger to enhance the

company's revenue as well as its global position.

• The market share of Kraft after Cadbury's acquisition would reach 14.9% in the global confectionery market, pushing Mars-Wrigley , with a market share of 14.5%, to second position.

• This would enable the company to offer Kraft brands such as Oreo biscuits and Maxwell House Coffee with Cadbury's Dairy Milk chocolate and Trident chewing gum

After the acquisition:• The Kraft-Cadbury amalgamation created a portfolio of 81

confectionery and chocolate products

• For the first quarter ended March 2011, Kraft reported strong performance as the company's net revenues were at US$12.6 billion.

• Operating income increased US$1.6 billion.

• David Brearton, Executive Vice President of Operations, said, "We're confident we'll deliver organic net revenue growth of at least 4% to 5% in 2011." Earlier, Kraft revised its estimation of total cost saving of US$ 750 million from US$625 million per year...

conclusion

• Kraft along with Cadbury are building a better and stronger team, well

• In this way mergers and acquisitions helps the companies to grow, expand.

Thank You