Merger of Kraft & Cadbury

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About Cadbury

Cadbury is the second largest confectionary, UK based company, started with manufacturing tea, coffee and later chocolate at Bull street in Birmingham and was formed by John Cadbury in 1824. The company was known as Cadbury Brothers Limited In 1969 Cadbury Brothers merged with Schweppes to form the international confectionary and beverages company Cadbury Schweppes plc. In 1989, the company purchased Trebor Bassett forming the UK confectionary subsidiary Cadbury Trebor Bassett .

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Cadbury India

Cadbury India began its operations in India in 1948 by importing chocolates. It now has manufacturing facilities in Thane, Induri (Pune) and Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesh) and sales offices in New Delhi, Mumbai, Kolkata and Chennai. Since 1965 Cadbury has also pioneered the development of cocoa cultivation in India. For over two decades, Cadbury has worked with the Kerala Agricultural University to undertake cocoa research. Currently, Cadbury India operates in four categories: chocolate confectionery, milk food drinks, beverage and candy & gum category.
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Its products include Cadbury Dairy Milk, Bournville, 5-Star, Perk, Gems, Eclairs, Bournvita, Celebrations, Bilkul Bournville, Cadbury Dairy Milk Shots, Cadbury Dairy Milk Silk, Halls, Tang and Oreo. It is the market leader in the chocolate confectionery business with a market share of over 70%. The Brand Trust Report, India Study, 2011 published by Trust Research Advisory ranked Cadbury in the top 100 most trusted brands list.

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Kraft Foods

Kraft foods is the second largest food and beverage corporation headquartered in US and was formed on December 10,1923 by Thomas H.McInnerney. Started with ice-cream manufacturing and later expanded into full range of dairy products. It is enjoying presence in more than 155 countries. Kraft is an independent public company; it is listed on the Nasdaq.

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Financial

Kraft
Revenue- US$ 40.4 billion (FY 2009) Operating Income- US$5.52 billion (FY 2009) Net Income- US$3.01 billion (FY 2009) Employees-98,000(2008)

Cadbury
Revenue-GB 5,384 million (2008) Operating Income-GB 388 million (2008) Net Income-GB 364 million (2008)
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Employees- 71,657 (2008)

Major Stakeholders
The major stakeholder in this acquisition deal are as follows:

Cadburys Shareholder M & A advisor Stock market speculator Senior Management of Cadbury Senior Management of Kraft Krafts Shareholder European Union
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About the takeover The following are the key events in Kraft's takeover battle for Cadbury: AUG 28, 2009 - Irene Rosenfeld, Kraft's chairman and chief executive, meets Cadbury's chairman Roger Carr to outline a takeover deal in cash and shares which valued Cadbury's shares at 2/1/13 755 pence each, but Carr dismissed

SEPT 16 - Warren Buffett, the world's second richest man and a leading shareholder in Kraft with a 9.4pc stake, warned the US food group not to overpay for Cadbury.
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SEPT 30 - UK Takeover Panel rules that Kraft has until 5pm on Nov 9 to make a formal offer for Cadbury or walk away for six months. Cadbury reiterates its rejection of the Kraft bid. OCT 21 - Cadbury posts upbeat thirdquarter trading with underlying sales up 7pc as it raise its 2009 target for sales and profit margin growth. The shares fail to react as a counter bidder for Kraft is seen increasingly 2/1/13 unlikely.

NOV 18 - Both Italy's Ferrero and Hershey said separately they were reviewing a possible bid for Cadbury but gave no assurance that either would make an offer. NOV 23 - Cadbury shares hits all-time high of 819p on speculation of a battle between Kraft and rivals for the British chocolate maker.
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JAN 5, 2010 - Kraft sweetens bid with 60p more cash but cuts shares on offer to keep offer price unchanged. JAN 12 - Cadbury reports robust trading and rejects the bid on valuation. Ferrero pulls out. JAN 19 - Kraft seals a deal to buy Cadbury for 11.5bn Feb 05-Kraft had secured over 75% of the shares thus finalizing the deal. Mar 08- Cadburys shares was de-listed

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Agreements terms

Cadbury shareholder offer:500 pence cash and 0.1874 new Kraft for each Cadbury share. For each Cadbury ADS, Shareholders will receive 2000 pence and 0.7496 new craft share. Offer equates to 840 pence per Cadbury share and 3360 per Cadbury share ADS and based on Kraft share price of $29.58 and an exchange rate of 1.63 dollars to the pound Cadbury shareholders will get 10 pence per

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Agreements terms

Offer represents a multiple of 13 times Cadbury underlying 2009 EBITDA Kraft to reduce the number of acceptances required from 90 percent to 50 percent plus one Cadbury share Final offer does not require the approval of Kraft shareholders Full acceptance will result in the issue of 265 million new Kraft share, representing 15 percent of its enlarged share capital 2/1/13

 Kraft

Cadbury

The second largest food beverage company in the world Revenue in 2009 : 40.4 billion USD operations in more than 150 countries Top 3 competitors Nestle,pepsico and 2/1/13

The second largest confectionary company in the world Revenue in 2009:8 billion USD Very strong in asia pacific and latin america Top 3

KRAFT STRATEGIES
KRAFT FOODS OFFERED A CASH CUM STOCK DEAL TO MAKE IT LUCRATIVE TO THE CHARE HOLDERS AND ALSO IT ANNOUNCED A 10 PENCE BONUS DIVIDEND TO SHAREHOLDERS TO LURE THEM TO ACCEPT THE DEAL. AFTER INITIAL REJECTIONS BY THE CADBURY MANAGEMENT , KRAFT MADE ITS PROPOSAL DIRECTLY TO CADBURYS SHAREHOLDERS. KRAFT SOLD ITS PIZZA BRANDS INCLUDING DIGIORNO AND TOMBSTONE TO NESTLE AND USE THE PROCEEDS FROM THE 3.7 BILLION DEAL TO BOOST THE CASH COMPONENTOF ITS CADBURY BID. IT GOT APPROVAL FROM THE EU ANTITRUST COMMITTEE BY DIVESTING ITS POLISH AND ROMANIAN CHOCOLATE BUSINESS. THIS WAS DONE TO 2/1/13 MAINTAIN COMPETITION IN THE MARKET.

CADBURYS DEFENSIVE STRATEGY

CADBURY MOVED THE UK TAKEOVER PANEL TO PRESSURIZE KRAFT. CADBURY DISSCUSED A RIVAL OFFER WITH HERSHEY ( WHITE KNIGHT) CADBURY WAS SUCCESSFUL IN BOOSTING THE THIRD QUARTER RESULTS WHICH MADE THE COMPANY MORE VALUABLE.( WINDOW DRESSING) CADBURY HAD A VERY SIGNIFICANT PROPORTION OF THE LONG TERM INVESTORS INTERESTED AND INVOLVED IN THE STOCK AND WERE ABLE TO FORCE KRAFT TO COME TO UK AND TALK TO THE INVESTORS.THIS FORCED KRAFT TO NEGOTIATE INSTEAD OF JUST ROLLING OUT AN OFFER. A BIG PART OF CADBURYS DEFENCE STRATEGY 2/1/13 RESTED ON LIMITING THE IMPACT OF HEDGE FUNDS IN

THE CEO AND THE BOARD WERE VOCAL ABOUT THE LACK OF STRATEGIC PURPOSE IN THE DEAL. CADBURY CONSTANTLY MONITERED ITS TOP 50 TO 75 INVESTORS WHOM KRAFT MIGHT APPROACH . IT WAS A TACTILE ENGAGMENT TO BUILD PEOPLES EXPECTATIONS OF WHAT VALUE CADBURY COULD DELIVER IN THE FACE OF KRAFTS OFFER. CADBURY PUBLISHED DOCUMENTS IN DEFENSE AGAINST THE HOSTILE STRATEGY OF KRAFT ON JANUARY 12 2/1/13

PLANS AFTER TAKEOVER

KRAFT FOOD IS THE WORLDS LARGEST CONFECTIONARY COMPANY. KRAFT BELIEVES THAT THE COMBINED COMPANY COULD TARGET LONG TERM ORGANIC REVENUE GROWTH IN EXCESS OF 5% AND SUSTAINABLE LONG TERM EPS GROWTH OF 9% TO 11 % WHEREAS KRAFT TARGETS LONG TERM REVENUE GROWTH OF 4% AND AN EPS OF 7% T 9 % ON A STAND ALONE BASIS.

THE HIGHER LONGTERM REVENUE GROWTH RATES IN REVENUES AND BOTTOM LINES WILL BE DRIVEN BY REVENUE SYNERGIES AND $625MILLION IDENTIFIED ANNUAL COST SAVINGS.
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POST MERGER EVENTS

WORKFORCE MANAGEMENT AND TAX AVOIDANCE. ENSURE KEY TALENT IS RETAINED DUE TO THE WEAK RELATIONSHIPS AMONG THE MANAGEMENT AND THE STAKE HOLDERSWARNING SUCH AS WARRENBUFFET. DEBT LOADED ON KRAFT FOODS DUE TO THE MERGER MAKES WORKFORCE OPTIMIZATION IMMINENT.KRAFT FOODS ANNOUNCED IN DECEMBER 2010 TO MOVE CADBURYS 2/1/13

KRAFT AND CADBURY TODAY

13% RISE IN THE INCOME YOY SUGGESTS THE SYNERGY OF THE DEAL IN ACTION AND INTEGRATION PLAN. 90% OF THE RISE IN INCOME CONTRIBUTED BY CADBURY DIVISION. RIGHT JUDGEMENT OF KRAFT FOR GEOGRAPHICAL DIVERSIFICATION OF POOR AMERICAN MARKET. 34.1% BOOST IN EUROPEAN REVENUESNEW MARKET ENTRY FOR PRODUCT PORTFOLIOS.
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CONSEQUENCES OF THE MERGER ULTIMATE KRAFT HAS BECOME THE

CANDY MAKER ON EARTH. A NEW BRITISH ICON IN DANGER. 30,000 JOBS AT RISK. BUSINESS FUNCTIONS AND OPERATIONS CAN GO OUT OF ENGLAND. COLLISION BETWEEN TWO CULTURES. ONLY 1/3 RD OF THE CADBURY MANAGEMENT ON THE BOARD OF 2/1/13

CONSEQUENCES OF THE MERGER

GORDOWN ANNOUNCED A POLICY ON ECONOMIC PROTECTIONISM IN CASES OFTAKE OVER OF LARGE COMPANIES. THE TRADE UNION LAUNCHED A PETITION ON A SEPARATE SITE WELOVECADBURY.COM .

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CONSEQUENCES IN INDIA AFTER THE MERGER

A few months after Kraft acquired Cadbury in a $18.9-billion hostile takeover, Sanjay Khosla, the head of Kraft's operations in developing markets, called the merger a marriage made in heaven. Not everyone at the Indian company will agree certainly not the 20-odd senior executives across functions such as supply chain, sales, legal and finance who have resigned since the integration began.
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CONSEQUENCES OF THE MERGER

The Economic Times cites a source stating that nearly all of the senior employees left citing a clash of cultures and "an inability to deal with Kraft's heavy hand on the operations". Before the takeover, it notes that Cadbury was "nimble-footed, taking pricing and promotional decisions on the ground without having to wait for official approvals from the top brass". And whereas approvals for marketing and advertising budgets at Cadbury would be cleared swiftly within a few days 2/1/13 pre-takeover, now they come after a month

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