KRAFT TAKESOVER CADBURY

INTRODUCTION
• LONDON/CHICAGO (Reuters) - Kraft Foods
sealed a friendly deal to buy British candy
maker Cadbury for about $19.6 billion (11.9
billion pounds) after frantic last-minute talks
broke an impasse over price.
• The deal would create the world's biggest
confectioner, and analysts see little likelihood
of 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 to
Thomson 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
 KRAFT
• Kraft is the largest food company in the
United States and holds the number two
position worldwide, behind Nestle.
• The firm has two main operating units-
Kraft Foods North America and Kraft
Foods International.
• Kraft's brands bring in more than $1 billion
in revenues each year.
•
• The company holds the top global
position in 11 product categories:
coffee, cookies, crackers, cream
cheese, dessert mixes, dry
packaged dinners, lunch
combinations, powdered soft
drinks, process cheese, salad
dressings, and snack nuts.
• Kraft Foods' products are made at
more than 220 manufacturing
facilities around the world and are
sold in more than 140 countries.
 HISTORY OF CADBURY
• Cadbury, the global leader in the
confectionery market, began in
1824 when a young Quaker
named John Cadbury opened up
a shop in Birmingham.
• Till 1842 John was selling 11 kinds
of cocoa and 16 kinds of
drinking chocolate.
• Cadbury manufactured its first
milk chocolate in 1897.
• The next year Cadbury merged
with JS Fry & Sons, a past
market leader in chocolate.
• In 1969 Cadbury merged with
Schweppes to form Cadbury
Schweppes.
• Today Cadbury Schweppes is the
largest confectionery company in
the world, employing more than
70,000 employees. In 2006 the
company had over $15 billion
inoverall sales.
 The premium implied in Kraft’s initial
proposal was low and has since been
eroded
Kraft Cadbury / market
In the same period,
Since Kraft made equity markets
its initial and share prices
proposal, its of Cadbury’s
share price has peers have risen
fallen 5%, substantially and
reducing the Cadbury has
value of its announced its
strong results.
offer by 3%.
-5% +7%
Cadbury’s share
price

Kraft’s share
+ 11 %
price Cadbury peer group†
 Kraft and Cadbury actions
in relation to the Offer to
date
• On 28 August 2009, Irene Rosenfeld, Chairman and Chief
Executive Officer of Kraft, met with Mr. Carr, following a
request for such a meeting from Irene Rosenfeld. At this
meeting, Ms. Rosenfeld proposed a business combination
between Cadbury and Kraft.
•
• Kraft was prepared to offer 300 pence in cash and 0.2589
new Kraft Shares per Cadbury Share. The possible offer
valued each Cadbury Share at 755 pence.
•
• After the Board had given Kraft’s proposal careful
consideration, Mr. Carr sent a letter to Ms. Rosenfeld
informing her that the Directors rejected Kraft’s
unsolicited proposal on the grounds that it was
unattractive and fundamentally undervalued the Group.
•
• On 7 September 2009, Kraft released a press
announcement in accordance with Rule 2.4 of the City
Code setting out the terms of a possible offer for
Cadbury and Ms. Rosenfeld addressed a letter to Mr. Carr
asking him to reconsider Cadbury’s rejection of the
possible offer.
•
• On the same day, Cadbury released a response statement
confirming Cadbury’s rejection
•
• On 9 November 2009, Kraft announced its firm intention to
make the Offer in accordance with Rule 2.5 of the City
Code.
•
• On the same day, Cadbury issued an announcement stating
that the Board had emphatically rejected the Offer and
that it recommended that Shareholders also reject the
Offer.
•
• On 4 December 2009, Kraft formally made the Offer by
posting the Offer Document and filing the US Offer
 INTERESTING FACTS OF
CADBURY
• Cadbury was the first company to include
pictures instead of printed text on
chocolate boxes.
• George Cadbury didn’t want to take mothers
away from their children, so he developed
a company rule that women had to leave
work when they got married.
• Each married woman was given a bible and
a carnation as wedding gifts.
 So many children joined Cadbury’s
Cococub Club that it had 300,000 members
in 1936.
• Cadbury launched a Get Active program in
 CADBURY’S BID FOR
INDEPENDENCE


• Cadbury will release its penultimate defence

document in which it will emphasise strong
Christmas sales and an improving outlook for 2010
as it seeks to convince shareholders to reject Kraft's
£10.5billion takeover offer.
•
• The chocolate-maker is expected to say it has
bettered its target for 5 per cent sales growth over
the festive season in a broad-ranging rejection of
Kraft's cash and shares offer.
•
• Desperate to see off Kraft's original offer, the
company was granted permission from the Takeover
Panel to present a two pronged defence because its
results will be crucial to making up the minds of
 KRAFT FOODS INC. 1
PROPOSAL OF
COMBINATION WITH
CADBURY.
Ø On 7 September 2009, Kraft Foods announced that they
sent a letter to the Board of Directors of Cadbury plc to
discuss the possibility of combining two companies.
Ø Although the Board of Cadbury plc has rejected this
proposal, Kraft Foods is committed to working toward a
recommended transaction and to maintaining a
constructive dialogue.
Ø Kraft Foods is proposing an offer for Cadbury of 300 pence
in cash and 0.2589 new Kraft Foods shares per Cadbury
share.
Ø This values each Cadbury share at 745 pence and values
the entire issued share capital of Cadbury at £10.2
billion.
Ø The combination would build on Kraft Foods' position as a
global powerhouse in snacks, confectionery and quick
meals with a rich portfolio of iconic brands
 This proposed combination would
create:
•
• A company with approximately $50 billion in revenues


• A global powerhouse in snacks, confectionery and

quick meals with an exceptional portfolio of leading
brands
•
• A geographically diversified combined business, with
leading positions and significant scale in key
developing markets including India, Mexico, Brazil,
China, and Russia.


• A strong presence in instant consumption channels in

both developed and developing markets, expanding
the reach and margin potential of the combined
 CADBURY REJECTS KRAFT’S
PROPOSAL
• Kraft Foods Inc. proposed a $16.7bn billion
takeover of Cadbury PLC, but the offer was
immediately rejected by the British maker of
chocolate, gum and candy
• Cadbury said the offer undervalued the company,
and expressed confidence in its "standalone
strategy and growth prospects as a result of its
strong 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 to
Mars Inc. with 14.8 percent. Kraft was fifth at
• Cadbury has a 10.3 percent share of the world
confectionary market in 2008, second only to Mars
Inc. with 14.8 percent. Kraft was fifth at 4.5 percent.
•
• Cadbury, nearly tripled its net profit in the first half of
the year as the company pocketed a big gain from
the sale of its beverage business and chocolate
consumption rose which kraft couldn’t do.


• Kraft’s offer completely misses the value which

CADBURY has already created.
• Cadbury expected that the next phase of Vision
into Action which was to deliver improved
revenue growth, enhanced profitability and
higher cash returns couldn’t have been possible
if kraft would have takeover.
 How they stack up
CADBURY KRAFT
SIZE 2nd largest confectionery co World’s 2nd largest
after mars
BRANDS ANDDairy milk-wrigley
and roses food group,
Oscar mayerafter
hot
PRODUCTS
REVENUE IN chocolates,
$8.8 billion trident gum and nestle.
dogs, maxwell house
$42 billion
EMPLOYEES halls
2008 46000cough drops. instant
98000 coffee, milka,
FOUNDED IN 1824 toblerone
1903 and tang.

HQ Uxbridge , london Northfeild , illinois

CEO Todd stitzer Irene rosenfeld
 NO 1 PRODUCT OF
CADBURY

GUMS CHOCOLATES

CANDY
REVENUE OF CADBURY
PRODUCTS
46
%

33
%
21
%
 KRAFT REVENUE DISTRIBUTION
 Chocolate
Gum Candy
United Kingdom 35% 9%
23%
USA 34% _
10%
Australia 48% –
20%
France – 48%
21%
Canada 15% 45%
22%
 KRAFT

20
%
CADBURY

62
%
 Cadbury agree $19.5 bn
deal
• After months of fierce resistance, Cadbury's
about-face to accept a sweetened 11.5
billion pound, or $19.5 billion, takeover
from Kraft Foods Inc. — forming the world's
biggest candy company
•
• Deal will make world’s largest chocolate
maker, 2nd biggest gum producer
•
• The deal, comprising 500 pence cash and
0.1874 new Kraft shares for each Cadbury
share, is a 9 percent premium to its
previous 770 pence offer and 50 percent
 Buffet against this deal
Ø Buffet is the chairman of Kraft’s biggest
shareholder- Berkshire Hathaway.
Ø “I have a lot of doubts,” Mr. Buffett said, adding
that he would vote against the bid if he had the
chance.
Ø Mr. Buffett warned Kraft against overpaying for
the UK company earlier this month, and voted
against its original plan to issue 370million new
shares to pay for the deal.
Ø Despite his view that Kraft paid too much, Mr.
Buffett said he won't be selling his stake in the
company, best known for its cheese slices and
Maxwell House coffee.
Ø He said doing so was writing Cadbury a “blank
cheque” because Kraft’s stock is undervalued.
Ø
DEAL PRICE TRACKER
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 ivin g h ig h e r sh a re p rice s a s w e lla s th e
sh a re h o ld e rs o f K ra ft.
O ve ra llC a d b u ry g o t a ve 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 to
m 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
th e m a rke t.
S a y b ye to C a d b u ry a n d w e lco m e K ra ft…..