Introduction

Early beginnings
- History of Cadbury vs. History of Kraft Foods
o Culture (Europe vs. America)
o Values
Why did this deal take place?
Advantages for Kraft
- Expand portfolio in confectionery
business, more lucrative
- Geographical expansion into emerging
markets with high growth potential
- Tap into Cadburys distribution channel
effectiveness (instant consumption
channels)
-
Advantages for Cadbury
- Share premium offered by Kraft of 58%

Consequence of the deal announcement
- Warren Buffetts caution
o Should not overpay for Cadbury dissatisfaction
o Distrustful of potential synergies, preferring to look at historical cash flows
o Irene R. believed that Buffetts ignorance of potentially transformational synergies
was devaluing the deal
- Trade unions dissatisfaction
o Up to 7,000 jobs predicted to be lost
Offer document laid out a significant cost savings target more likely to
lead to job losses than saved jobs
o Bad track record of Kraft
Acquired Terrys but closed its York factories even though it promised to
maintain production
- Heritage and nationalist lobby
o Felicity Loudon, Cadbury family heiress, sold her GBP 48m house to fund a new
chocolate company.
Indignant that an American plastic cheese company had bought her great-
grandfathers company
Consequences of the transaction
- Warren Buffett reduced his holdings from 9.5% to 6%
o Value investing vs. short-term investing
- Shareholders unsure whether the premium paid was too high
- Significant integration costs also contribution to a reduction in bottom-line figures by 24%
- Somerdale factory closed down, workers and union upset
Was the acquisition successful?
No
o Net profits fell 24% to $540m in the quarter, due to high integration costs
o Less than ideal rise in Cadburys sales
Yes
o 2012 FY earnings jumped by 54%
o Revenues from developing markets were up 16% to $15.9b, now constitutes 30% of
total revenue

Why was Kraft successful in acquiring Cadbury?
- According to Mr. Carr, the sudden shift toward a deal was spurred by the increase over the
past week in the portion of the company's stock owned by hedge funds and other investors
that recently piled in looking for a quick payoff. Fearing that those investors, who now held
about 30% of the shares, would sell for a price below what the board thought it was worth,
Mr. Carr took a 7 p.m. call from Ms. Rosenfeld at his home on Sunday night.
o "The risk was that if they had gone to the market with a lower offer, there was a
chance that we would have lost with a lower number. We could not settle for an
inappropriate price."
- UK government was not keen on providing protection from Kraft, an American company, for
Cadbury, an English company
o Consistency with their Open Market policy
- Pushed Nestle out of the acquirer pool by reducing their cash pile through the sale of the
Pizza business. Nestle was number one foods company globally at the time.
- No competitive counter-bids materialised from Hershey, Ferrero Rocher.
What changes could be made to the regulatory framework to better regulate hostile takeover bids?
- Stricter enforcement of pre-transaction agreements (in reference to Krafts broken promise
to reverse Somerdale factory closure decision)
-