Kraft Close to Finalising a Deal with Cadbury On $19 Billion Takeover

Kraft Foods believes a combination represents a strong and complementary strategic fit, creating a global confectionery leader with a portfolio of more than 40 confectionery brands each with annual sales in excess of USD 100 million.

19 Jan 2010 --- British candy maker Cadbury PLC has accepted and recommended to shareholders Kraft's improved takeover offer worth $18.9 billion, potentially ending a months-long corporate battle to create the world's largest maker of chocolate and sweets. The U.S. food conglomerate said the board of Cadbury, maker of Creme Eggs and Dentyne gum, had unanimously endorsed the offer worth 840 pence per share, or 11.9 billion pounds in total.

Under the terms of the Final Offer, Cadbury Securityholders will be entitled to receive: for each Cadbury Share 500 pence in cash and 0.1874 New Kraft Foods Shares for each Cadbury ADS 2,000 pence in cash and 0.7496 New Kraft Foods Shares representing, in aggregate, 840 pence per Cadbury Share and GBP 33.60 per Cadbury ADS.

In addition, Cadbury Shareholders will be entitled to receive 10 pence per Cadbury share by way of a Special Dividend following the date on which the Final Offer becomes or is declared unconditional. The terms of the Final Offer reflect the strength of Cadbury's business, its brands and the future potential for growth through the combination of Kraft Foods and Cadbury.

The deal will draw to a close an often acrimonious hostile takeover battle between the two food companies, one that began with Kraft making public an unsolicited $16.7 billion bid for Cadbury in early September. The Cadbury management quickly derided the offer as too low and dismissed the prospect of being absorbed into what it called a slow-growing food conglomerate.

The news that Cadbury and Kraft are close to finalising a deal sent the British chocolate maker to the top of the FTSE 100 this morning. Shares in Cadbury jumped to 836p when trading began, up 28.5p or 3.5%.

Kraft Foods said it believes that the Final Offer represents a compelling opportunity for Cadbury Securityholders, providing the ability to receive approximately 60 per cent of their consideration in cash and long-term value creation potential through a continued shareholding in the Combined Group. The Final Offer represents an attractive multiple of 13.0 times Cadbury's underlying 2009 EBITDA. Kraft Foods believes a combination with Cadbury will provide the potential for meaningful cost savings and revenue synergies from which Cadbury Securityholders will benefit.

Kraft Foods believes a combination represents a strong and complementary strategic fit, creating a global confectionery leader with a portfolio of more than 40 confectionery brands each with annual sales in excess of USD 100 million. Kraft Foods and Cadbury have a highly complementary geographic footprint, providing the Combined Group with a leading presence in attractive global markets. The Combined Group will have a leading position in developing markets, including in Brazil, Russia, India, China, and Mexico. The Combined Group will benefit from important additional scale in the consolidating confectionery segment. The Combined Group will have best-in-class infrastructure in both traditional and instant consumption routes to market.

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 Cadbury employees and managers. In addition, Kraft Foods has given assurances to Cadbury that, on the Final Offer becoming or being declared wholly unconditional, the existing contractual employment rights, including pension rights, of all employees will be fully safeguarded.

Kraft Foods has also announced that it reserves the right to, and intends to, reduce the number of acceptances required to fulfil the Acceptance Condition from 90 per cent. to 50 per cent. plus one Cadbury Share on or after 26 January 2010. The Final Offer does not require the approval of Kraft Foods Shareholders. Accordingly, the condition relating to such approval, as set out in the Original Offer Documents, is treated as satisfied for the purposes of the Final Offer. Full acceptance of the Final Offer will result in the issue of 265 million New Kraft Foods Shares, representing approximately 18 per cent. of the existing issued share capital and 15 per cent. of the enlarged issued share capital of Kraft Foods.

Commenting on the Offer, Irene Rosenfeld, Chairman and CEO of Kraft Foods, said: "We have great respect for Cadbury’s brands, heritage and people. We believe they will thrive as part of Kraft Foods. This recommended offer represents a compelling opportunity for Cadbury Shareholders, providing both immediate value certainty and upside potential in the combined company. For Kraft Foods Shareholders it transforms the portfolio, accelerates long-term growth and delivers highly attractive returns, while maintaining financial discipline."

Commenting on the Offer, Roger Carr, Chairman of Cadbury, said:"We believe the offer represents good value for Cadbury shareholders and are pleased with the commitment that Kraft Foods has made to our heritage, values and people throughout the world. We will now work with the Kraft Foods' management to ensure the continued success and growth of the business for the benefit of our customers, consumers and employees."

Cadbury Securityholders who have previously accepted the Original Offer (and have not withdrawn those acceptances) will automatically be deemed to have accepted the terms of the Final Offer by virtue of their prior acceptances and therefore need take no further action. Other Cadbury Securityholders who wish to accept the recommended Final Offer must take action to accept the Final Offer by 1.00 pm (London time) / 8.00 am (New York City time) on 2 February 2010.