Cadbury Publishes Further Defense Document to Kraft’s Offer

Cadbury said that its 2009 performance is well ahead of market expectations, driven by strong growth in the fourth quarter and the savings generated by Cadbury’s Vision into Action business plan. The company expects 5% base business revenue growth; up 11% on an actual currency basis.

13 Jan 2010 --- The Board of Cadbury plc has published its second response document following the offer posted by Kraft Foods Inc. on 4 December 2009. The Board has unanimously rejected Kraft’s wholly inadequate Offer and continues to recommend that shareholders take no action in relation to the Offer.

Roger Carr, Chairman of Cadbury, said: "Kraft’s Offer is even more unattractive today than it was when Kraft made its formal offer in December. Our 2009 performance is ahead of our previously upgraded expectations and we have excellent momentum going into 2010.”

"Kraft's offer is very significantly below all comparable transactions in the sector; applying any of the comparable multiples would imply a price per share far above Kraft’s offer. Over half the offer consideration is in the form of Kraft shares, exposing our shareholders to Kraft’s low growth conglomerate business model, its long history of underperformance and its track record of missed targets.”

The Response Document sets out the latest estimate of its outstanding financial performance for 2009 and highlights our strong business momentum going into 2010.

Cadbury said that its 2009 performance is well ahead of market expectations, driven by strong growth in the fourth quarter and the savings generated by Cadbury’s Vision into Action business plan. The company expects 5% base business revenue growth; up 11% on an actual currency basis:

• Trading margin of 13.5%; up 155 bps on a constant currency basis and 160 bps on an actual currency basis

• Full year dividend growth expected to be 10%

• Further evidence of our management team’s strong track record of delivery

Strong second half performance and excellent momentum going into 2010:

• 6% base business revenue growth for the second half of 2009‡

• Sustained investment to support our long-term revenue growth target of 5-7% through investments in key growth drivers including our emerging market businesses and innovation capabilities

• Specific activities to drive margin improvement in 2010, including additional benefits from the manufacturing reconfiguration programme and continuing SG&A reduction initiatives

• Strong business momentum, combined with 6% compound average growth in revenues from 2004 to 2009‡ and 370 bps margin improvement since 2007*‡, provides the foundation for our enhanced long-term targets
 
Commenting on the 2009 performance, Todd Stitzer, Cadbury’s CEO said: “Our performance in 2009 was outstanding. We generated good revenue growth despite the weakest economic conditions in 80 years. At the same time, our Vision into Action plan drove a 160 basis point improvement in margin to 13.5%*‡, on an actual currency basis, delivering over 70% of our original target in half the time.”

“Looking forward to 2010, we are targeting revenue growth within our 5-7% goal range, led by new product innovations across our categories and supported by incremental investment in marketing. We expect benefits from our restructuring and reconfiguration actions in 2010 to drive continued progress to achieve our targets of good mid-teens margin by 2011 and 16-18% margin by 2013.”

The Response Document also sets out further reasons why Cadbury believes Kraft’s Offer is even more unattractive today than it was when they published the Offer in December.
 
The company said that Kraft’s Offer remains derisory, with the Offer price valuing Cadbury at only 12.0 times 2009 EBITDA.