The Acquisition of Cadbury by Kraft Foods Group Inc. Presented by Blake Downward (CFO of Kraft Foods) Asif Mahmud (CMO of Kraft Foods)

Transcription

1 The Acquisition of Cadbury by Kraft Foods Group Inc. Presented by Blake Downward (CFO of Kraft Foods) Asif Mahmud (CMO of Kraft Foods)

2 Contents Who are Kraft Foods Group Inc.? Who are Cadbury Enterprises Ltd? The attraction How did it all begin? The details Capital Budgeting Where are we today? (Post Acquisition) Managing the Managers!

3 Kraft Foods Group

4 Kraft Foods Group Kraft is a US company which was founded in nd largest food company in the world with presence in over 150 countries 11 established brands each bringing in $1billion globally in revenue Established in developed markets; North America and Europe Highly competitive market with low margins Small presence in emerging markets Famous for Oreo, Chips Ahoy! and Toblerone

5 Kraft Foods Group

6 Cadbury Enterprises Ltd Chinese Brand Name is 吉百利 (Jíbǎilì) Confectionary Company ( 糕饼 ) (Gāobǐng) Founded in 1824 by John Cadbury 70,000 employees globally prior to the acquisition Revenue in excess of 5 billion Export over 200 products to 30 countries worldwide Cadbury s subsidiary based in Guangzhou, China Chocolate market is worth over 10 trillion annually Market growth is 7.4% and Cadbury s are growing at 8.6% Top 3 competitors are Hershey s, Mars and Nestle Famous for Dairy Milk Chocolate, Crème Egg and Roses

7 Why Purchase Cadbury? Established brand with presence in existing and emerging markets (40% of total sales) Allows Kraft to diversify into these new markets Chocolate & chewing gum are high margin products (14%) Enables Kraft to become the largest confectioner (14.8%) Confectionary is a resilient growing market Iconic brands Cadbury, Trident, Halls & Dentyne Access to shelf space The UK is politically and economically stable Double taxation treaty Long term investment

8 Why Purchase Cadbury?

9 Why Purchase Cadbury?

10 Why Purchase Cadbury?

11 How did it all begin? 28 th of August 2009 Initial approach of 755p per share is rejected 7 th of September Our approach is made public but bid value has decreased 30 th of September Deadline for bid set to the 9/11/2009 by the UK Takeover Panel 4 th of December Official bid document presented to Cadbury Shareholders 5 th of January 2010 Offer increased On the 19 th of January 2010, Kraft complete takeover of Cadbury

12 The Details Currency Conditions effect of the exchange rates Cash-flows / Hedging USD/GBP monthly std. dev. 2.21% FTSE/NASDAQ corr Dividends to parent

13 The Details Currency Conditions effect of the exchange rates Cash-flows / Hedging

14 The Details Initial bid (28% premium) Final bid (44% premium) $19.6 billion USD (13 x of Cadbury s 2009 EBITDA) Funding the acquisition

15 The Details Cash (GBP) # Kraft Shares Kraft Price (USD) Exchange Rate Total (GBP) Cadbury Price (GBP) Premium 7/09/ % 19/01/ %

16 Funding the acquisition The Details Kraft financed this purchase with a combination of debt and equity. New share issue Kraft issued 265 million shares as part of the payment (15% increase in number of shares) Sold pizza business to Nestle Secured $9.2 billion (USD) debt finance from Citigroup and Deutsche Bank 50% debt finance

17 Capital Budgeting Cost Savings through economies of scale Cadbury s investment into R&D and new Technology Less barriers to entry (Shelf Space) Opportunity to increase margins IT cost savings of $430 million annually Potential cost savings of $675 million ($300million in procurement, manufacturing & logistics, $250million in general & administrative, $100million in marketing & sales Reduction in number of suppliers to increase efficiency Potential to reduce cash conversion cycle by 5 days Reduce overheads as % of revenue from 14% to 12.5%

18 Post Acquisition

19 Managing the Managers 45 Senior managers from Cadbury successfully integrated into Kraft Former Cadbury executives have taken 1/3 rd of Kraft s top 50 positions across the company Emerging markets taking advantage of the talent Staff retention and integration is always going to be a challenge Workshops to encourage cooperation and knowledge transfer

20 Questions?