Kraft Foods Inc. to Make Offer for Cadbury PLC
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NORTHFIELD, Ill., Nov. 9 /PRNewswire-FirstCall/ --
SUMMARY
-- Kraft Foods is pleased to announce the terms of an Offer for Cadbury
-- Kraft Foods will offer to acquire the whole of the issued and to be
issued share capital of Cadbury as follows:
for each Cadbury Share 300 pence in cash
and
0.2589 New Kraft Foods Shares
for each Cadbury ADS 1,200 pence in cash
and
1.0356 New Kraft Foods Shares
-- The terms of Kraft Foods' Offer reflect all publicly available
information on Cadbury, including its recent interim management
statement
-- The Offer represents a substantial premium to the unaffected share price
of Cadbury
-- The Offer represents an attractive multiple of Cadbury's underlying
EBITDA
-- Kraft Foods' current trading and prospects are strong
-- Kraft Foods' estimated cost synergies have been carefully evaluated and
are in line with precedent transactions, including Cadbury's acquisition
of Adams
-- Cadbury Shareholders will share in the benefits of a combination,
including synergies, through the share element of the consideration
-- No other potential offeror has publicly declared its interest in
acquiring Cadbury
-- Kraft Foods remains committed to maintaining a financially disciplined
approach
Commenting on the Offer, Irene Rosenfeld, Chairman and CEO of Kraft Foods, said:
"We remain convinced of the strategic merits for both companies of combining Kraft Foods and Cadbury. We believe that our proposal offers the best immediate and long-term value for Cadbury's shareholders and for the company itself compared with any other option currently available, including Cadbury remaining independent."
This summary should be read in conjunction with the full text of the following announcement.
Enquiries:
Kraft Foods
Perry Yeatman (Media) +1 847 646 4538
Chris Jakubik (Investors) +1 847 646 5494
Lazard (lead financial adviser)
Jeffrey Rosen +1 212 632 6000
Antonio Weiss +1 212 632 6000
William Rucker +44 20 7187 2000
Peter Kiernan +44 20 7187 2000
Citigroup (corporate broking)
David James +44 20 7986 4000
Deutsche Bank (corporate broking)
James Agnew +44 20 7545 8000
Brunswick Group (public relations)
Richard Jacques +44 20 7404 5959
Jonathan Glass +44 20 7404 5959
Financial advisers:
Centerview Partners
Robert Pruzan
Citigroup
Leon Kalvaria
Deutsche Bank
Nigel Meek
Further information
This announcement will be available on Kraft Foods' website (http://www.transactioninfo.com/kraftfoods/) by no later than 12 noon (London time) on 10 November 2009.
The conditions to which the Offer will be subject and certain further terms of the Offer are set out in Appendix I to this announcement. Appendix II to this announcement sets out the sources and bases of certain financial and other information contained in this announcement. Appendix III to this announcement sets out a summary of the new credit agreement referred to in paragraph 16 of this announcement. Appendix IV to this announcement contains definitions of certain expressions and terms used in this announcement.
Lazard & Co., Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as financial adviser to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Lazard & Co., Limited, nor for providing advice in relation to the Offer or any matters referred to herein.
Centerview Partners UK LLP, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as financial adviser to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Centerview Partners UK LLP, nor for providing advice in relation to the Offer or any matters referred to herein.
Citigroup Global Markets Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as financial adviser and corporate broker to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Citigroup Global Markets Limited, nor for providing advice in relation to the Offer or any matters referred to herein.
Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin - Federal Financial Supervisory Authority) and authorised and subject to limited regulation by the Financial Services Authority. Details about the extent of Deutsche Bank AG's authorisation and regulation by the Financial Services Authority are available on request. Deutsche Bank AG is acting as financial adviser and corporate broker to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to anyone other than Kraft Foods for providing the protections afforded to the clients of Deutsche Bank AG nor for providing advice in relation to the Offer or any other matters referred to herein.
This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to this announcement or otherwise. The Offer will be made solely by the offer documentation, which will contain the full terms and conditions of the Offer, including details of how it may be accepted. This announcement is not a prospectus and investors should not subscribe for any New Kraft Foods Shares except on the basis of information in the Prospectus or the Registration Statement (as appropriate) which are proposed to be published and/or filed in due course. The New Kraft Foods Shares are not being offered to the public by means of this announcement.
This announcement has been prepared in accordance with English law and the Takeover Code and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.
The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom and the United States, and the availability of the Offer to Cadbury Shareholders who are not resident in the United Kingdom or the United States, may be affected by the laws or regulations of relevant jurisdictions. Therefore any persons who are subject to the laws and regulations of any jurisdiction other than the United Kingdom or the United States, or Cadbury Shareholders who are not resident in the United Kingdom or the United States, will need to inform themselves about, and observe, any applicable requirements. Unless otherwise determined by Kraft Foods or required by the Takeover Code and permitted by applicable law and regulation, copies of this announcement are not being, and must not be, directly or indirectly, mailed, transmitted or otherwise forwarded or sent in, into or from Japan or any other Restricted Jurisdiction and persons receiving this announcement (including, without limitation, custodians, nominees and trustees) must not mail or otherwise forward, distribute or send it in, into or from any such jurisdiction. Any person (including, without limitation, any custodian, nominee and trustee) who would, or otherwise intends to, or who may have a contractual or legal obligation to, forward this announcement and/or any other related document to any jurisdiction outside the United Kingdom or the United States should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdiction. Further details in relation to overseas shareholders will be contained in the Offer Document.
The Offer may provide that New Kraft Foods Shares which would otherwise be issued to an accepting Cadbury Shareholder resident in a Restricted Jurisdiction may be sold, and the net proceeds of sale remitted to the accepting Cadbury Shareholder.
Kraft Foods reserves the right to elect, with the agreement of Cadbury and the consent of the Panel (where necessary), to implement the acquisition of Cadbury by way of a court-approved scheme of arrangement in accordance with Part 26 of the 2006 Act. In such event, the acquisition will be implemented on substantially the same terms, subject to appropriate amendments, as those which would apply to the Offer.
Notice to US investors
This announcement does not constitute, or form part of, any offer for, or any solicitation of any offer for securities, nor is it a solicitation of any vote or approval in any jurisdiction, nor will there be any purchase or transfer of the securities referred to in this announcement in any jurisdiction in contravention of applicable law or regulation.
The Offer is being made for securities of a UK company and United States investors should be aware that this announcement, the Offer Document and any other documents relating to the Offer have been or will be prepared in accordance with the Takeover Code and UK disclosure requirements, format and style, all of which may differ from those in the United States. Cadbury's financial statements, and all Cadbury financial information that is included in this announcement or that may be included in the Offer Document or any other documents relating to the Offer, have been or will be prepared in accordance with United Kingdom generally accepted accounting principles and/or International Financial Reporting Standards and thus may not be comparable to financial statements of United States companies.
The Offer will be made in the United States pursuant to applicable US tender offer rules and otherwise in accordance with the requirements of the Takeover Code. Accordingly, the Offer will be subject to disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments that may be different from those typically applicable under US domestic tender offer procedures and law.
The receipt of cash and New Kraft Foods Shares pursuant to the Offer by a United States holder of Cadbury Shares may be a taxable transaction for United States federal income tax purposes and under applicable US state and local, as well as foreign and other tax laws. Each holder of Cadbury Shares is urged to consult his independent professional adviser regarding the tax consequences of acceptance of the Offer.
Cadbury is incorporated under the laws of England and Wales. All or some of the directors of Cadbury are residents of countries other than the United States. As a result, it may not be possible for United States holders of Cadbury Shares to effect service of process within the United States upon Cadbury or such directors of Cadbury or to enforce against any of them judgements of the United States predicated upon the civil liability provisions of the federal securities laws of the United States. It may not be possible to sue Cadbury or its officers or directors in a non-US court for violations of US securities laws.
Forward-looking statements
This announcement contains forward-looking statements regarding the Offer, expected future earnings, revenues, cost savings, operations, business trends and other such items, based on Kraft Foods' plans, estimates and projections. These forward-looking statements involve risks and uncertainties, many of which are beyond the control of Kraft Foods, that could cause Kraft Foods' actual results to differ materially from those indicated in any such forward-looking statements. Such factors include, but are not limited to, continued volatility of input costs, pricing actions, increased competition, Kraft Foods' ability to differentiate its products from retailer brands, unanticipated expenses in connection with litigation, settlement of legal disputes, regulatory investigations or enforcement actions, Kraft Foods' indebtedness and ability to pay its indebtedness, the shift in consumer preference to lower priced products, risks from operating outside the United States, tax law changes, failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other conditions to the combination, adverse effects on the market price of Kraft Foods' Shares and on Kraft Foods' operating results because of a failure to complete the combination, failure to realise the expected benefits of the combination, significant transaction costs and/or unknown liabilities and general economic and business conditions that affect the Combined Group following the combination. For additional information on these and other factors that could affect Kraft Foods' forward-looking statements, see Kraft Foods' filings with the SEC, including Kraft Foods' most recently filed annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Kraft Foods disclaims and does not undertake any obligation to update or revise any forward-looking statement in this announcement except as required by applicable law or regulation.
Additional US-related information
Kraft Foods intends to file a registration statement and tender offer documents with the SEC in connection with the proposed combination. United States holders of Cadbury Shares and holders of Cadbury ADSs, wherever located, should read those filings, and any other filings made by Kraft Foods with the SEC in connection with the combination, as they will contain important information. Those documents, when filed, as well as Kraft Foods' other public filings with the SEC may be obtained without charge at the SEC's website at www.sec.gov and at Kraft Foods' website at www.kraftfoodscompany.com.
Dealing disclosure requirements
Under the provisions of Rule 8.3 of the Takeover Code, if any person is, or becomes, "interested" (directly or indirectly) in 1 per cent. or more of any class of "relevant securities" of Kraft Foods or of Cadbury, all "dealings" in any "relevant securities" of that company (including by means of an option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by no later than 3.30 pm (London time) on the Business Day following the date of the relevant transaction. This requirement will continue until the date on which the Offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the "offer period" otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an "interest" in "relevant securities" of Kraft Foods or of Cadbury, they will be deemed to be a single person for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the Takeover Code, all "dealings" in "relevant securities" of Kraft Foods or of Cadbury by Kraft Foods or Cadbury, or by any of their respective "associates", must be disclosed by no later than 12.00 noon (London time) on the Business Day following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose "relevant securities" "dealings" should be disclosed, and the number of such securities in issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk.
"Interests in securities" arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an "interest" by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Takeover Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a "dealing" under Rule 8, you should consult the Panel.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION
9 November 2009
OFFER
by
KRAFT FOODS INC.
for
CADBURY PLC
1. Introduction
On 7 September 2009, Kraft Foods announced the terms of a possible offer for Cadbury. Since that date, Kraft Foods has continued to evaluate the benefits of a possible combination with Cadbury and has considered carefully all publicly available information, including Cadbury's interim management statement released on 21 October 2009. In the light of this evaluation, Kraft Foods is pleased to announce the terms of an Offer to acquire the whole of the issued and to be issued share capital of Cadbury as set out below.
2. The Offer
Under the Offer, which will be subject to the conditions and further terms set out in Appendix I to this announcement and those to be set out in the Offer Document and the Form of Acceptance, Cadbury Shareholders will be entitled to receive:
for each Cadbury Share 300 pence in cash
and
0.2589 New Kraft Foods Shares
for each Cadbury ADS 1,200 pence in cash
and
1.0356 New Kraft Foods Shares
Based on the closing share price of USD 26.78 per Kraft Foods Share on 6 November 2009, the Offer values each Cadbury Share at 717 pence and values the entire issued share capital of Cadbury at approximately GBP 9.8 billion (based on an exchange rate of 1.6609 USD / GBP). All payments of cash will be made in pounds sterling.
3. The Offer represents a substantial premium
The Offer represents a substantial premium to the unaffected share price of Cadbury. The Offer price equates to a premium of:
-- 37 per cent. over Cadbury's share price of 524 pence on 3 July 2009,
prior to analyst suggestions regarding potential sector consolidation;
-- 29 per cent. over Cadbury's 90-day average share price of 555 pence in
the period up to 4 September 2009, the last Business Day preceding the
announcement by Kraft Foods of a possible offer for Cadbury; and
-- 26 per cent. over Cadbury's closing share price of 568 pence on 4
September 2009, the last Business Day preceding the announcement by
Kraft Foods of a possible offer for Cadbury,
in each case based on the closing share price of USD 26.78 per Kraft Foods Share on 6 November 2009 and an exchange rate of 1.6609 USD / GBP.
4. The Offer represents an attractive multiple
The Offer equates to:
-- a multiple of 28.9 times Cadbury's diluted underlying earnings per
share;(1) and
-- an enterprise value multiple of 13.9 times Cadbury's underlying
EBITDA,(1)
in each case based on the closing share price of USD 26.78 per Kraft Foods Share on 6 November 2009 and an exchange rate of 1.6609 USD / GBP.
Given Cadbury's mix of businesses, there are no previous transactions which are perfectly comparable with Kraft Foods' proposed acquisition of Cadbury. However, as highlighted by Cadbury at the time, Cadbury paid 12.8 times historical EBITDA for Adams in 2002. At the time of the Adams acquisition, the price to historical earnings ratios of the Dow Jones Industrial Average and the FTSE 100 were 22.4x and 18.4x respectively. They currently both stand at 17.4x, reflecting the significantly altered economic and stock market climates.
5. Kraft Foods' current trading and prospects are strong
On 3 November 2009, Kraft Foods released its Q3 report in which Kraft Foods delivered strong continued momentum in its underlying business. Organic revenue growth of 0.5 per cent. was driven by continuing improvements in volume/mix, despite the dampening impact of several strategic decisions made to improve the long-term prospects of Kraft Foods' business. This volume/mix trend underpinned strong gains in margins and earnings per share, with a 470 basis point improvement in operating margins and a 62 per cent. rise in earnings per share from continuing operations, including a 9 cent, or 26 per cent., gain from operational sources. Kraft Foods also raised earnings per share and cash flow guidance for the year. Kraft Foods increased its guidance for 2009 diluted earnings per share to at least USD 1.97 versus the prior expectation of at least USD 1.93.(2) Continued momentum in cash flow performance reflected strong operational performance, with Kraft Foods raising its discretionary cash flow outlook for the year by USD 400 million to at least USD 3 billion.(2) Kraft Foods expects to achieve this guidance while continuing to increase investment behind its brands, with advertising and consumer marketing spending expected to grow to approximately 7 per cent. of sales from 6.7 per cent. of sales in 2008.
Kraft Foods believes that this performance provides further evidence of its long-term sustainable business model and the attractiveness to Cadbury Shareholders of holding Kraft Foods Shares. Should the combination with Cadbury be completed, Kraft Foods would expect to revise its long-term growth targets to 5+ per cent. for revenue and 9-11 per cent. for earnings per share, from its previously announced 4+ per cent. and 7-9 per cent. respectively.(3)
6. Kraft Foods' estimated synergies have been carefully evaluated and are in line with precedent transactions
Kraft Foods' previously announced estimated pre-tax annual cost savings of at least USD 625 million(*) are expected to be achieved over and above the current performance improvement programmes at each of Kraft Foods and Cadbury (including Cadbury's Vision into Action ("VIA") programme). Kraft Foods believes that, as both companies have been actively rationalising their cost bases over the last few years, the most easily achieved cost saving initiatives have already been implemented and VIA represents a significant cost cutting programme in its own right. Further, Kraft Foods will take on the risks associated with delivering the remaining margin improvement associated with VIA.
Notwithstanding this, the expected cost savings have been carefully evaluated, are in line with other relevant transactions and are greater, as a percentage of revenues, than the 6.5 per cent. estimated by Cadbury at the time it announced its acquisition of Adams in December 2002.
Cadbury has since stated that it achieved synergies representing 14 per cent. of revenues from its acquisition of Adams. It should be noted that this level of synergies was achieved approximately four years after the transaction was announced and includes revenue synergies equating to 6-7 per cent. of revenues.
Given the complementary nature of Kraft Foods and Cadbury, Kraft Foods believes that there is potential for meaningful revenue synergies from a combination of the two businesses. Such synergies will, however, take time to be realised and will require significant investments in distribution, marketing and product development.
Cadbury Shareholders who accept the Offer will be able to share in all synergies resulting from the combination of Kraft Foods and Cadbury through the Kraft Foods share component of the Offer.
(*)See section 10 below for further details of the estimated cost savings.
7. Kraft Foods is a unique fit for Cadbury and is the only offeror
As set out more fully in "Background to and reasons for the Offer" below, Kraft Foods believes that Cadbury and Kraft Foods represent a uniquely complementary fit. Accordingly, Kraft Foods believes that it is the most logical acquiror of Cadbury. No other potential offeror has publicly declared its interest in acquiring Cadbury.
8. Kraft Foods will remain financially disciplined
Kraft Foods will continue to maintain a disciplined approach with respect to an acquisition of Cadbury in line with four key criteria:
-- accretion to earnings in the second year following completion on a cash
basis(3) (which excludes the one-time expenses related to the
transaction and the impact of non-cash items such as the amortisation of
intangibles after acquisition);
-- a return on investment in excess of Kraft Foods' cost of capital within
an acceptable timeframe; (3)
-- retention of Kraft Foods' investment-grade credit rating; and
-- maintenance of Kraft Foods' dividend.
9. Background to and reasons for the Offer
Over the past three years, Kraft Foods has built strong operating and financial momentum. Among other actions, Kraft Foods has strengthened its senior leadership team, decentralised and empowered its business units, invested in its core brands, built upon its scale in the marketplace and improved product quality.
As a result of the above actions, Kraft Foods is now in a position to pursue its long-term strategy from a position of strength. Four priorities have shaped this strategy:
-- focusing on growth categories to transform Kraft Foods into a leading
snack, confectionery and quick meals company. This is being achieved
through exiting lower-growth, lower-margin businesses and reinvigorating
high cash flow businesses to fund growth;
-- expanding its footprint in rapidly growing developing markets to benefit
from trading up by consumers and achieving the scale to establish
cost-efficient infrastructure in key geographies;
-- increasing its presence in the instant consumption channels as they
continue to gain share versus grocery channels in the US and European
Union; and
-- enhancing its margins by improving the portfolio mix and reducing costs
while investing in quality.
Kraft Foods believes that a combination with Cadbury would accelerate the achievement of these priorities. Thus, the combination has compelling strategic and financial rationale for shareholders of both Kraft Foods and Cadbury.
Kraft Foods believes that a combination with Cadbury would build on a global powerhouse in snacks, confectionery and quick meals, with an exceptional portfolio of leading brands around the world.
Combining the Kraft Foods and Cadbury businesses would create a global confectionery leader, with a portfolio including more than 40 confectionery brands, each with annual sales in excess of USD 100 million. Globally, the Combined Group would be number one in the chocolate and sugar confectionery segments and a strong number two in the high growth gum segment. Cadbury's leading brands such as Cadbury, Trident and Halls, are highly complementary to Kraft Foods' portfolio and would benefit from Kraft Foods' global scope, scale and array of proprietary technologies and processes.
Kraft Foods believes that confectionery markets are consolidating and scale is becoming increasingly important, in part due to retailers' increasing bargaining power, control of the supply chain and growing portfolio of their own retailer brands, which have benefited from the global economic climate. The combination of Kraft Foods and Cadbury provides the necessary scale to compete even more effectively in the confectionery sector.
As Kraft Foods' customers grow and consolidate, Kraft Foods believes that there are benefits to growing along with them. This allows Kraft Foods to act as a stronger partner, creates efficiencies for both partners and maintains balance as the customers increase their scale.
Cadbury's geographic footprint is complementary to that of Kraft Foods. Importantly, a combination would increase scale in developing markets for both companies. Kraft Foods' operations in developing markets currently deliver revenues twice those of Cadbury. Kraft Foods' businesses in Brazil, China and Russia are, in aggregate, about three times larger than Cadbury's businesses in those countries. Conversely, Cadbury would provide Kraft Foods with a meaningful entry into India and South Africa and would be transformational in Mexico. The Combined Group would also have improved positions in several developed markets, such as France and Spain.
Kraft Foods' and Cadbury's routes to market are also highly complementary. Kraft Foods is particularly strong in the grocery channel in North America and Western Europe. Cadbury is well positioned in instant consumption channels, which have become increasingly important in both developed and developing markets. A combination provides an enhanced platform for the Combined Group to distribute both Cadbury's and Kraft Foods' products through both channels and creates an attractive opportunity for higher growth and margins.(3)
10. Estimated cost savings
Kraft Foods believes a combination with Cadbury will provide the potential for meaningful revenue synergies over time from investments in distribution, marketing and product development. In addition, Kraft Foods believes there is a significant opportunity to realise pre-tax cost savings of at least USD 625 million annually.(* )
Kraft Foods expects that it will achieve the run-rate on these cost savings by the end of the third year following completion. Total one-off implementation cash costs of approximately USD 1.2 billion are expected to be incurred in the first three years following completion.(* )
The expected sources of the expected annual pre-tax cost savings of at least USD 625 million are:
-- potential operational cost savings of USD 300 million per annum
resulting from efficiencies and economies of scale in the areas of
procurement, manufacturing, customer service, logistics and research and
development;
-- potential general and administrative cost savings of USD 200 million
resulting from efficiencies in the areas of central, regional and
country level administrative expenses; and
-- potential marketing and selling cost savings of USD 125 million
resulting from efficiencies and economies of scale in the areas of
marketing, media and selling expenses.
* The estimate of cost savings set out in this announcement was announced on 7 September 2009 and was reported on for the purposes of the Takeover Code by Ernst & Young LLP and by Lazard & Co., Limited. For copies of their reports, see the announcement released by Kraft Foods on 7 September 2009, available on Kraft Foods' website (http://www.transactioninfo.com/kraftfoods/). There are various material assumptions underlying the cost savings estimate which might therefore be materially greater or less than that estimated. The estimate of cost savings should therefore be read in conjunction with Appendix II of the announcement released by Kraft Foods on 7 September 2009, which contains, among other information, certain key assumptions underlying the estimate.
11. Further information on the Offer
Cadbury Shares are to be acquired pursuant to the Offer fully paid and free from all liens, charges, equities, encumbrances, rights of pre-emption and other interests of any nature whatsoever and together with all rights attaching to them on or after the date of this announcement, including, without limitation, voting rights and the right to receive and retain in full all dividends and other distributions (if any) declared, made or paid, or any other return of capital (whether by reduction of share capital or share premium account or otherwise) on or after the date of this announcement. Accordingly, Kraft Foods reserves the right to reduce the Offer consideration, through an appropriate mechanism, in the event that any such dividends or distributions are declared.
The New Kraft Foods Shares will be issued credited as fully paid and will rank pari passu in all respects with the Kraft Foods Shares issued and outstanding at the time the New Kraft Foods Shares are issued pursuant to the Offer, including the right to receive and retain in full all dividends and other distributions (if any) declared, made or paid by reference to a record date falling after the date on which the New Kraft Foods Shares are issued to relevant Cadbury Shareholders. The New Kraft Foods Shares will be registered under the US Securities Act and will be listed on the NYSE.
Fractions of New Kraft Foods Shares will not be allotted or issued to Cadbury Shareholders who accept the Offer but will be aggregated and sold in the market and the net proceeds of sale distributed (in pounds sterling) pro rata to Cadbury Shareholders entitled thereto.
Based on publicly available information, full acceptance of the Offer will result in the issue of approximately 369,174,324 New Kraft Foods Shares (assuming 1,425,934,044 issued and to be issued Cadbury Shares on the basis set out in Appendix II to this announcement), representing approximately 20.0 per cent. of the enlarged issued share capital of Kraft Foods following completion of the Offer.
12. Mix and Match Facility
Under the terms of the Offer, Kraft Foods expects to make available a Mix and Match Facility to Cadbury Shareholders. Under the Mix and Match Facility, accepting Cadbury Shareholders may elect to vary the proportions in which they receive New Kraft Foods Shares and cash consideration, subject to off-setting elections being made by other Cadbury Shareholders. To the extent that elections cannot be satisfied in full, they will be scaled down on a pro rata basis.
13. Information on Kraft Foods
With origins dating back to 1903, Kraft Foods is the world's second largest food company with revenues of USD 41,932 million and earnings from continuing operations before income taxes of USD 2,603 million in 2008.
Incorporated in the Commonwealth of Virginia, Kraft Foods is headquartered in Northfield, Illinois, United States of America. Kraft Foods has approximately 100,000 employees worldwide, who manufacture and market packaged food products, including snacks, beverages, cheese, convenient meals and various packaged grocery products. Kraft Foods sells its products to consumers in approximately 150 countries. As at 31 December 2008, Kraft Foods had operations in more than 70 countries and made its products at 168 manufacturing and processing facilities worldwide. At 30 September 2009, Kraft Foods had net assets of USD 25,211 million and gross assets of USD 66,669 million.
Kraft Foods has a proven track record of successfully completing and integrating strategic combinations to build and grow iconic brands and multi-national businesses. These acquisitions include LU in 2007 and Nabisco in 2000.
Kraft Foods has been growing and developing well-loved brands, including: Terry's, Milka, Cote d'Or and Toblerone chocolates; Oreo, Ritz and LU biscuits; Kenco, Maxwell House, Carte Noire and Jacobs coffees; and Dairylea and Philadelphia cheeses. Nine brands in Kraft Foods' portfolio have annual revenues exceeding USD 1 billion and more than 50 brands have annual revenues greater than USD 100 million.
14. Management, employees and locations
Kraft Foods believes that Cadbury and Kraft Foods represent a uniquely complementary fit and expects that the combination will enhance the Combined Group's growth profile.(3) The combination will augment the world-class capabilities of both Kraft Foods and Cadbury by employing a "best of both" approach, from sales and marketing to distribution and management. In particular, Kraft Foods believes that the global business network of the Combined Group will create opportunities for talented Cadbury employees and managers.
Within the UK, Kraft Foods believes it will be in a position to continue to operate the Somerdale facility, which is currently planned to be closed, and invest in Bournville, thereby preserving UK manufacturing jobs.
In addition, Kraft Foods has given assurances to the directors of Cadbury that, on the Offer becoming or being declared wholly unconditional, the existing contractual employment rights, including pension rights, of all Cadbury Group employees will be fully safeguarded.
15. Cadbury Share Schemes
The Offer will extend to any Cadbury Shares unconditionally allotted or issued before the Offer closes (or such earlier time as Kraft Foods may, subject to the rules of the Takeover Code, decide) as a result of the exercise of options or vesting of awards granted under any of the Cadbury Share Schemes. Appropriate proposals will be made in due course to holders of options and awards granted under the Cadbury Share Schemes.
16. Financing the cash consideration
Kraft Foods is providing the cash consideration payable under the Offer from its own resources, some of the funds available from a new credit facility that has been arranged by a syndicate of banks and/or proceeds from alternative financing sources. A summary of the terms of the new credit facility is contained in Appendix III.
Lazard & Co., Limited, Centerview Partners UK LLP, Citigroup Global Markets Limited and Deutsche Bank AG, London Branch are satisfied that sufficient resources are available to Kraft Foods to satisfy in full the cash consideration payable as a result of full acceptance of the Offer.
17. Overseas shareholders
The availability of the Offer and of the New Kraft Foods Shares under the terms of the Offer to persons not resident in the United Kingdom or the United States may be affected by the laws of the relevant jurisdiction. Such persons should inform themselves about and observe any applicable legal or regulatory requirements. Further details in relation to overseas shareholders will be contained in the Offer Document.
18. Shareholder approval
In view of the size of the potential equity issuance by Kraft Foods in connection with the Offer, it is expected that Kraft Foods Shareholders will be required to approve the share issuance proposal. Accordingly, any required resolutions will be put to a special meeting of Kraft Foods Shareholders and will need to be approved by a simple majority of the votes cast, provided that the total number of votes cast represents a majority of the outstanding votes.
19. Compulsory acquisition, de-listing and cancellation of trading
If the Offer becomes or is declared wholly unconditional, it is the intention of Kraft Foods, assuming it becomes so entitled, to acquire compulsorily any outstanding Cadbury Shares pursuant to the provisions of the 2006 Act, including any Cadbury Shares represented by Cadbury ADSs.
Following the Offer becoming or being declared wholly unconditional and sufficient acceptances being received, Kraft Foods intends to procure that Cadbury will apply for the cancellation of the listing of the Cadbury Shares on the Official List and trading on the London Stock Exchange for listed securities and the delisting of the Cadbury ADSs on the NYSE. De-listing is likely to reduce significantly the liquidity and marketability of any Cadbury Shares or Cadbury ADSs in respect of which the Offer has not been accepted.
Following the delisting of the Cadbury ADSs from the NYSE, Kraft Foods intends to procure that Cadbury files with the SEC a request that Cadbury's reporting obligations under the US Exchange Act be terminated, if and when Cadbury is eligible to do so.
20. General and documentation
The Offer will be on the terms and subject to the conditions set out in this announcement (including in Appendix I), and the full terms to be set out in the Offer Document and the Form of Acceptance. Relevant documentation will be sent to Cadbury Shareholders (other than certain overseas shareholders) and, for information purposes, to persons with information rights and to participants in the Cadbury Share Schemes, in due course.
In deciding whether or not to accept the Offer in respect of their Cadbury Shares, Cadbury Shareholders should consider the information contained in, and the procedures described in, such documentation.
21. Disclosure of interests in Cadbury
Save as disclosed below, as at 5 November 2009, being the last practicable date prior to this announcement, neither Kraft Foods nor, so far as Kraft Foods is aware, any party deemed by the Panel to be acting in concert with Kraft Foods, has any interest in or right to subscribe for any Cadbury Shares or has any short positions (whether conditional or absolute and whether in the money or otherwise), including any short position under a derivative, any agreement to sell, or any delivery obligation or right to require any other person to purchase or take delivery in Cadbury Shares or has borrowed or lent any Cadbury Shares (save for any borrowed shares which have either been on-lent or sold):
Name Number of Cadbury Shares Number of Cadbury ADSs
Citigroup Global Markets 1,100 (short) 24,811 (short)
Inc.
Kraft Foods Global, Inc. 314,686
Master Retirement Trust
Hasim Salim 588
(Director of PT Kraft Foods
Company Indonesia)
Notes:
(1) In each case for the year ending 31 December 2008. Underlying EBITDA and diluted underlying earnings per share are calculated based on Cadbury's definitions and include adjustments for restructuring costs, non-trading items, amortisation and impairment of acquisition intangibles, derivative accounting and any associated tax effect.
(2) The Profit Forecast was announced on 3 November 2009 and reported on pursuant to the Takeover Code by PricewaterhouseCoopers LLP and by Lazard & Co., Limited, Centerview Partners UK LLP, Citigroup Global Markets Limited and Deutsche Bank AG, London Branch. For copies of their reports, see the Kraft Foods Q3 Results released by Kraft Foods on 3 November 2009, available on Kraft Foods' website (www.kraftfoodscompany.com).
(3) Nothing in this announcement (other than the Profit Forecast) is intended to be a profit forecast and no other statement in this announcement should be interpreted to mean that the earnings per Kraft Foods Share for the current or future financial periods will necessarily be greater than those for the relevant preceding financial period.
Enquiries:
Kraft Foods
Perry Yeatman (Media) +1 847 646 4538
Chris Jakubik (Investors) +1 847 646 5494
Lazard (lead financial adviser)
Jeffrey Rosen +1 212 632 6000
Antonio Weiss +1 212 632 6000
William Rucker +44 20 7187 2000
Peter Kiernan +44 20 7187 2000
Citigroup (corporate broking)
David James +44 20 7986 4000
Deutsche Bank (corporate broking)
James Agnew +44 20 7545 8000
Brunswick Group (public relations)
Richard Jacques +44 20 7404 5959
Jonathan Glass +44 20 7404 5959
Financial advisers:
Centerview Partners
Robert Pruzan
Citigroup
Leon Kalvaria
Deutsche Bank
Nigel Meek
Further information
This announcement will be available on Kraft Foods' website (http://www.transactioninfo.com/kraftfoods/) by no later than 12 noon (London time) on 10 November 2009.
The conditions to which the Offer will be subject and certain further terms of the Offer are set out in Appendix I to this announcement. Appendix II to this announcement sets out the sources and bases of certain financial and other information contained in this announcement. Appendix III to this announcement sets out a summary of the new credit agreement referred to in paragraph 16 of this announcement. Appendix IV to this announcement contains definitions of certain expressions and terms used in this announcement.
Lazard & Co., Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as financial adviser to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Lazard & Co., Limited, nor for providing advice in relation to the Offer or any matters referred to herein.
Centerview Partners UK LLP, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as financial adviser to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Centerview Partners UK LLP, nor for providing advice in relation to the Offer or any matters referred to herein.
Citigroup Global Markets Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as financial adviser and corporate broker to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Citigroup Global Markets Limited, nor for providing advice in relation to the Offer or any matters referred to herein.
Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin - Federal Financial Supervisory Authority) and authorised and subject to limited regulation by the Financial Services Authority. Details about the extent of Deutsche Bank AG's authorisation and regulation by the Financial Services Authority are available on request. Deutsche Bank AG is acting as financial adviser and corporate broker to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to anyone other than Kraft Foods for providing the protections afforded to the clients of Deutsche Bank AG nor for providing advice in relation to the Offer or any other matters referred to herein.
This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to this announcement or otherwise. The Offer will be made solely by the offer documentation, which will contain the full terms and conditions of the Offer, including details of how it may be accepted. This announcement is not a prospectus and investors should not subscribe for any New Kraft Foods Shares except on the basis of information in the Prospectus or the Registration Statement (as appropriate) which are proposed to be published and/or filed in due course. The New Kraft Foods Shares are not being offered to the public by means of this announcement.
This announcement has been prepared in accordance with English law and the Takeover Code and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.
The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom and the United States, and the availability of the Offer to Cadbury Shareholders who are not resident in the United Kingdom or the United States, may be affected by the laws or regulations of relevant jurisdictions. Therefore any persons who are subject to the laws and regulations of any jurisdiction other than the United Kingdom or the United States, or Cadbury Shareholders who are not resident in the United Kingdom or the United States, will need to inform themselves about, and observe, any applicable requirements. Unless otherwise determined by Kraft Foods or required by the Takeover Code and permitted by applicable law and regulation, copies of this announcement are not being, and must not be, directly or indirectly, mailed, transmitted or otherwise forwarded or sent in, into or from Japan or any other Restricted Jurisdiction and persons receiving this announcement (including, without limitation, custodians, nominees and trustees) must not mail or otherwise forward, distribute or send it in, into or from any such jurisdiction. Any person (including, without limitation, any custodian, nominee and trustee) who would, or otherwise intends to, or who may have a contractual or legal obligation to, forward this announcement and/or any other related document to any jurisdiction outside the United Kingdom or the United States should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdiction. Further details in relation to overseas shareholders will be contained in the Offer Document.
The Offer may provide that New Kraft Foods Shares which would otherwise be issued to an accepting Cadbury Shareholder resident in a Restricted Jurisdiction may be sold, and the net proceeds of sale remitted to the accepting Cadbury Shareholder.
Kraft Foods reserves the right to elect, with the agreement of Cadbury and the consent of the Panel (where necessary), to implement the acquisition of Cadbury by way of a court-approved scheme of arrangement in accordance with Part 26 of the 2006 Act. In such event, the acquisition will be implemented on substantially the same terms, subject to appropriate amendments, as those which would apply to the Offer.
Notice to US investors
This announcement does not constitute, or form part of, any offer for, or any solicitation of any offer for securities, nor is it a solicitation of any vote or approval in any jurisdiction, nor will there be any purchase or transfer of the securities referred to in this announcement in any jurisdiction in contravention of applicable law or regulation.
The Offer is being made for securities of a UK company and United States investors should be aware that this announcement, the Offer Document and any other documents relating to the Offer have been or will be prepared in accordance with the Takeover Code and UK disclosure requirements, format and style, all of which may differ from those in the United States. Cadbury's financial statements, and all Cadbury financial information that is included in this announcement or that may be included in the Offer Document or any other documents relating to the Offer, have been or will be prepared in accordance with United Kingdom generally accepted accounting principles and/or International Financial Reporting Standards and thus may not be comparable to financial statements of United States companies.
The Offer will be made in the United States pursuant to applicable US tender offer rules and otherwise in accordance with the requirements of the Takeover Code. Accordingly, the Offer will be subject to disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments that may be different from those typically applicable under US domestic tender offer procedures and law.
The receipt of cash and New Kraft Foods Shares pursuant to the Offer by a United States holder of Cadbury Shares may be a taxable transaction for United States federal income tax purposes and under applicable US state and local, as well as foreign and other tax laws. Each holder of Cadbury Shares is urged to consult his independent professional adviser regarding the tax consequences of acceptance of the Offer.
Cadbury is incorporated under the laws of England and Wales. All or some of the directors of Cadbury are residents of countries other than the United States. As a result, it may not be possible for United States holders of Cadbury Shares to effect service of process within the United States upon Cadbury or such directors of Cadbury or to enforce against any of them judgements of the United States predicated upon the civil liability provisions of the federal securities laws of the United States. It may not be possible to sue Cadbury or its officers or directors in a non-US court for violations of US securities laws.
Forward-looking statements
This announcement contains forward-looking statements regarding the Offer, expected future earnings, revenues, cost savings, operations, business trends and other such items, based on Kraft Foods' plans, estimates and projections. These forward-looking statements involve risks and uncertainties, many of which are beyond the control of Kraft Foods, that could cause Kraft Foods' actual results to differ materially from those indicated in any such forward-looking statements. Such factors include, but are not limited to, continued volatility of input costs, pricing actions, increased competition, Kraft Foods' ability to differentiate its products from retailer brands, unanticipated expenses in connection with litigation, settlement of legal disputes, regulatory investigations or enforcement actions, Kraft Foods' indebtedness and ability to pay its indebtedness, the shift in consumer preference to lower priced products, risks from operating outside the United States, tax law changes, failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other conditions to the combination, adverse effects on the market price of Kraft Foods' Shares and on Kraft Foods' operating results because of a failure to complete the combination, failure to realise the expected benefits of the combination, significant transaction costs and/or unknown liabilities and general economic and business conditions that affect the Combined Group following the combination. For additional information on these and other factors that could affect Kraft Foods' forward-looking statements, see Kraft Foods' filings with the SEC, including Kraft Foods' most recently filed annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Kraft Foods disclaims and does not undertake any obligation to update or revise any forward-looking statement in this announcement except as required by applicable law or regulation.
Additional US-related information
Kraft Foods intends to file a registration statement and tender offer documents with the SEC in connection with the proposed combination. United States holders of Cadbury Shares and holders of Cadbury ADSs, wherever located, should read those filings, and any other filings made by Kraft Foods with the SEC in connection with the combination, as they will contain important information. Those documents, when filed, as well as Kraft Foods' other public filings with the SEC may be obtained without charge at the SEC's website at www.sec.gov and at Kraft Foods' website at www.kraftfoodscompany.com.
Dealing disclosure requirements
Under the provisions of Rule 8.3 of the Takeover Code, if any person is, or becomes, "interested" (directly or indirectly) in 1 per cent. or more of any class of "relevant securities" of Kraft Foods or of Cadbury, all "dealings" in any "relevant securities" of that company (including by means of an option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by no later than 3.30 pm (London time) on the Business Day following the date of the relevant transaction. This requirement will continue until the date on which the Offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the "offer period" otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an "interest" in "relevant securities" of Kraft Foods or of Cadbury, they will be deemed to be a single person for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the Takeover Code, all "dealings" in "relevant securities" of Kraft Foods or of Cadbury by Kraft Foods or Cadbury, or by any of their respective "associates", must be disclosed by no later than 12.00 noon (London time) on the Business Day following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose "relevant securities" "dealings" should be disclosed, and the number of such securities in issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk.
"Interests in securities" arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an "interest" by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Takeover Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a "dealing" under Rule 8, you should consult the Panel.
APPENDIX I: CONDITIONS AND CERTAIN FURTHER TERMS OF THE KRAFT FOODS OFFER
The Offer to be made by Kraft Foods will comply with the applicable rules
and regulations of the Takeover Code and applicable US tender offer rules
and will be governed by English law. In addition, it will be subject to
the following conditions and to the terms and conditions set out in the
Offer Document and in the Form of Acceptance.
1. Conditions of the Offer
The Offer will be subject to the following conditions:
Acceptance Condition
(a) valid acceptances being received (and not, where permitted, withdrawn)
by not later than 1.00 p.m. (London time) on the first closing date of
the Offer (or such later time(s) and/or date(s) as Kraft Foods may,
subject to the rules of the Takeover Code or with the consent of the
Panel, decide) in respect of not less than 90 per cent. (or such lower
percentage as Kraft Foods may decide) of the Cadbury Shares (including
Cadbury Shares represented by Cadbury ADSs) to which the Offer relates
and of the voting rights attached to those shares, provided that this
condition will not be satisfied unless Kraft Foods (together with its
wholly owned subsidiaries) shall have acquired or agreed to acquire
(whether pursuant to the Offer or otherwise) Cadbury Shares (including
Cadbury Shares represented by Cadbury ADSs) carrying in aggregate more
than 50 per cent. of the voting rights then normally exercisable at a
general meeting of Cadbury, including for this purpose (except to the
extent otherwise agreed by the Panel) any such voting rights attaching
to Cadbury Shares (including Cadbury Shares represented by Cadbury
ADSs) that are unconditionally allotted or issued before the Offer
becomes or is declared unconditional as to acceptances whether
pursuant to the exercise of any outstanding subscription or conversion
rights or otherwise, and provided that unless Kraft Foods otherwise
determines, this Condition 1(a) shall be capable of being satisfied or
being treated as satisfied only at the time when all of the other
Conditions 1(b) to 1(o) inclusive have been either satisfied,
fulfilled or, to the extent permitted, waived.
For the purposes of this condition:
(i) Cadbury Shares (including Cadbury Shares represented by
Cadbury ADSs) which have been unconditionally allotted shall
be deemed to carry the voting rights they will carry upon
issue;
(ii) Cadbury Shares that cease to be held in treasury are Cadbury
Shares (including Cadbury Shares represented by Cadbury ADSs)
to which the Offer relates; and
(iii) the expression "Cadbury Shares (including Cadbury Shares
represented by Cadbury ADSs) to which the Offer relates" shall
be construed in accordance with Chapter 3 of Part 28 of the
2006 Act;
Approval of Kraft Foods Shareholders
(b) the passing at a shareholder meeting of Kraft Foods (or at any
adjournment of the meeting) of all proposals that may be required
under certain rules of the NYSE to approve the issuance of the New
Kraft Foods Shares in connection with the Offer;
Listing on the NYSE
(c)
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