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Mergers and Acquisitions   Kraft Foods hostile takeover on Cadbury
Agenda <ul><li>Why acquiring Cadbury? </li></ul><ul><ul><li>Synergie </li></ul></ul><ul><li>What is the fair price? </li><...
Kraft Foods Business Vision Group 2  |  Mergers and Acquisitions
Why acquiring Cadbury? Irene Rosenfield’s expectations (Kraft CEO)
The synergies <ul><li>A Complimentary Global Presence </li></ul><ul><li>Knowledge Sharing </li></ul><ul><li>Economies of S...
Financial Valuation ($ price per share) Valuation summary Bid range Current price <ul><li>Stock trading history </li></ul>...
Deal Structure Pence + + = 0.1874 new Kraft share 500 pence cash 10 pence Dividend 850 1 Cadbury Share =  500 pence Cash +...
Challenges
Kraft-Cadbury: hostile takeover takes time <ul><li>Sept. 2009: </li></ul><ul><li>€ 13bn offer by  </li></ul><ul><li>kraft ...
Price Adjustment: from initial to final offer SEC Report 9 November 2009
What happened?  Acquisition
Acquisition outcomes &quot; Our integration is progressing extremely well…  We moved quickly to name our leadership teams,...
Questions? Group 2  |  Mergers and Acquisitions
 
Agreement terms <ul><li>Cadbury shareolder offer: 500 pence cash and 0.1874 new Kraft share for each Cabdury share, </li><...
At a glance … Group 2  |  Mergers and Acquisitions
Structure of the deal <ul><li>Once Kraft gains 75 percent of Cadbury's shares, it can delist them. At more than 90 percent...
Financing & agreement: $19,55bn deal worth Agreement Financing <ul><ul><li>Finance the acquisition consistent with an inve...
Why the price is fair <ul><li>From firm valuation DCF (based on historical statements, considering different growth rates)...
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M&A Kraft Cadbury

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Mergers and Acquisitions Case: Kraft hostile takeover on Cadbury.

After reviewing operations, finance, marketing, supply chain management, this practical example supported my learning within the legal international frame.

Penultimate presentation carried out within a mostly French group, interesting :)

Published in: Business

M&A Kraft Cadbury

  1. 1. Mergers and Acquisitions Kraft Foods hostile takeover on Cadbury
  2. 2. Agenda <ul><li>Why acquiring Cadbury? </li></ul><ul><ul><li>Synergie </li></ul></ul><ul><li>What is the fair price? </li></ul><ul><ul><li>Financial valuation </li></ul></ul><ul><ul><li>Price adjustment </li></ul></ul><ul><ul><li>Structure of the deal </li></ul></ul><ul><li>Challenges for the acquisition </li></ul><ul><ul><li>After the deal </li></ul></ul>Group 2 | Mergers and Acquisitions
  3. 3. Kraft Foods Business Vision Group 2 | Mergers and Acquisitions
  4. 4. Why acquiring Cadbury? Irene Rosenfield’s expectations (Kraft CEO)
  5. 5. The synergies <ul><li>A Complimentary Global Presence </li></ul><ul><li>Knowledge Sharing </li></ul><ul><li>Economies of Scale and Scope </li></ul>Source: Strategic Management, Group D IMBA2010-N3 Kraft Cadbury
  6. 6. Financial Valuation ($ price per share) Valuation summary Bid range Current price <ul><li>Stock trading history </li></ul><ul><ul><li>52-week (low-high) </li></ul></ul><ul><li>DCF </li></ul><ul><ul><li>Stand Alone </li></ul></ul><ul><ul><li>+synergies </li></ul></ul><ul><li>Trading comparables </li></ul><ul><ul><li>2008 P/E multiple </li></ul></ul><ul><ul><li>2008 EBITDA multiple </li></ul></ul><ul><ul><li>2008 EBIT(1-t) multiple </li></ul></ul><ul><ul><li>2008 EBIT Multiple </li></ul></ul><ul><li>Precedent transactions </li></ul><ul><ul><li>Mars/Wrigley EBIT </li></ul></ul>Valuation with synergies $ 625 millions/year & Restructuring costs : $ 1.2 billion on 3 years
  7. 7. Deal Structure Pence + + = 0.1874 new Kraft share 500 pence cash 10 pence Dividend 850 1 Cadbury Share = 500 pence Cash + 0.1874 new Kraft Share + 10 pence Special Dividend = 850 Pence
  8. 8. Challenges
  9. 9. Kraft-Cadbury: hostile takeover takes time <ul><li>Sept. 2009: </li></ul><ul><li>€ 13bn offer by </li></ul><ul><li>kraft foods </li></ul><ul><li>09 Nov. 2009: </li></ul><ul><li>Official hostile takeover </li></ul><ul><li>Kraft price €11,2bn </li></ul><ul><li>18 Nov. 2009 </li></ul><ul><li>Hershey & Ferrero </li></ul><ul><li>interested by Cadbury </li></ul><ul><li>acquisition </li></ul><ul><li>19 Nov. 2009 </li></ul><ul><li>KKR could make a </li></ul><ul><li>Common offer with </li></ul><ul><li>Hershey & Ferrero </li></ul><ul><li>02 Dec. 2009 </li></ul><ul><li>Hershey offer </li></ul><ul><li>could be €13,5bn </li></ul><ul><li>07 Dec. 2009 </li></ul><ul><li>UK govt will be </li></ul><ul><li>opposed to a simple </li></ul><ul><li>Financial operation </li></ul><ul><li>14 Dec. 2009 </li></ul><ul><li>Cadburry refused </li></ul><ul><li>the kraft offer </li></ul><ul><li>06 Jan. 2010 </li></ul><ul><li>EU commission </li></ul><ul><li>agreement </li></ul><ul><li>07 Jan. 2010 </li></ul><ul><li>For the first time </li></ul><ul><li>Share price mkt < </li></ul><ul><li>Share price </li></ul><ul><li>kraft offer </li></ul><ul><li>19 Jan. 2010 </li></ul><ul><li>New offer @ €13bn </li></ul><ul><li>04 Jan. 2010 </li></ul><ul><li>Hershey hesitation </li></ul><ul><li>due to the risk of </li></ul><ul><li>increasing the </li></ul><ul><li>group debt </li></ul><ul><li>02 Fev. 2010 </li></ul><ul><li>Cadbury shareholders accept Kraft bid </li></ul>* REJECTED * * REJECTED *
  10. 10. Price Adjustment: from initial to final offer SEC Report 9 November 2009
  11. 11. What happened? Acquisition
  12. 12. Acquisition outcomes &quot; Our integration is progressing extremely well…  We moved quickly to name our leadership teams, and I'm pleased that about a third of our top 50 executives are from Cadbury.  We've confirmed our synergy targets and the specific initiatives that will drive future margin expansion and accelerate our growth .“* * http://www.ibtimes.com/articles/22743/20100507/kraft-foods-gains-with-cadbury-integration.htm
  13. 13. Questions? Group 2 | Mergers and Acquisitions
  14. 15. Agreement terms <ul><li>Cadbury shareolder offer: 500 pence cash and 0.1874 new Kraft share for each Cabdury share, </li></ul><ul><li>For each Cadbury ADS, shareolders will receive 2,000 pence and 0.7496 new Kraft share, </li></ul><ul><li>Offer equates to 840 pence per Cadbury share and 3,360 pence per Cadbury ADS, based on a Kraft share price of $29.58 (January 15 closing price) and an exchange rate of 1.63 dollars to the pound. </li></ul><ul><li>Cadbury shareholders will get 10 pence per share by way of a special dividend </li></ul><ul><li>Offer values Cadbury at approximately 11.9 billion pounds </li></ul><ul><li>Offer represents a multiple of 13.0 times Cadbury's underlying 2009 EBITDA </li></ul><ul><li>Kraft to reduce the number of acceptances required from 90 percent to 50 percent plus one Cadbury Share </li></ul><ul><li>Final offer does not require the approval of Kraft shareholders </li></ul><ul><li>Full acceptance will result in the issue of 265 million new Kraft shares, representing 15 percent of its enlarged share capital </li></ul><ul><li>Cadbury says considers offer fair and reasonable </li></ul>
  15. 16. At a glance … Group 2 | Mergers and Acquisitions
  16. 17. Structure of the deal <ul><li>Once Kraft gains 75 percent of Cadbury's shares, it can delist them. At more than 90 percent, it can force remaining Cadbury shareholders to sell. </li></ul><ul><li>Source: http://www.reuters.com/article/idUSTRE61124D20100202 </li></ul>
  17. 18. Financing & agreement: $19,55bn deal worth Agreement Financing <ul><ul><li>Finance the acquisition consistent with an investment-grade rating </li></ul></ul><ul><ul><li>Selling of North American pizza business to Nestlé to acquire cash: US$3,7bn </li></ul></ul><ul><ul><li>60% of the offer finaning by cash </li></ul></ul><ul><ul><li>265 million new Kraft Foods Shares </li></ul></ul><ul><ul><li>Offer represents a multiple of 13.0 times Cadbury's underlying 2009 EBITDA </li></ul></ul><ul><ul><li>Cadbury shareolder offer: 500 pence cash and 0.1874 new Kraft share for each Cabdury share </li></ul></ul><ul><ul><li>Cadbury shareholders will get 10 pence per share by way of a special dividend </li></ul></ul>
  18. 19. Why the price is fair <ul><li>From firm valuation DCF (based on historical statements, considering different growth rates) </li></ul><ul><li>Valuation of Cadbury as stand alone </li></ul><ul><li>Valuation with the synergies 625 millions $ & Restructuring costs : 1.2 billions $ on 3 years </li></ul>

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