Cadbury Schweppes Takeover by Kraft

Topics: Kraft Foods, Cadbury plc, Mergers and acquisitions Pages: 8 (2953 words) Published: March 11, 2011
Cadbury Schweppes Takeover by Kraft

Currently, it is too early to speak of the recovery of American (and global) market of mergers and acquisitions (M&A). The volume of mergers and acquisitions fell by about 37% - to $ 1.75 trillion over the last year, and therefore fees of investment banks decreased (Zhang 2010). The deal between Kraft and Cadbury is the biggest one since March 2009, when Roche Holding completed the purchase of Genentech for U.S. $ 44 billion These transactions indicate the rehabilitation of selected major players and their optimistic assessment of their own investment prospects. Any M&A transaction in the financial crisis is the evidence of the fact that the participants find serious advantages of its implementation in the unstable period. Some companies find it advantageous to acquire other ones because of their readiness to sell themselves cheaper, others are afraid of the further depreciation of their assets. Perhaps, that is why, despite fears of losing autonomy in the development, Cadbury management accepted the proposal of the American company. Cadbury appeared in 1824 in Birmingham and was initially an ordinary grocery store of Cadbury family. Now Cadbury employs 45 thousand people in 60 countries and is the second largest confectionery in the world after the Mars-Wrigley. Among its most popular items are chocolate bars Dairy Milk, Crunchie, Wispa, candy Halls. The company annually sells more than 250 million chocolate bars in 33 countries. Revenue in 2008 made £5,4 billion, net profit - £364 million. According to Euromonitor research company, the company's share in the global market of confectionery products is 10,3% (‘Kraft Foods Inc. proposes combination with Cadbury Plc’ 2009). Kraft Foods is the second largest in the world producer of food and drinks after Nestle. It was established in 1903 by James Kraft, who sold wholesale cheese in Chicago. Kraft products are being sold in 150 countries. Its most famous chocolate products include Alpen Gold, Milka, Toblerone, cookies Oreo, cheese Dairylea. Nine brands, including Kraft, Jacobs, Maxwell House, and Milka, generate an annual revenue exceeding $1 billion. The company employs 98 thousand people around the world. Net sales in 2008 made $42 billion, net profit - $ 2.9 billion (Kraft Foods Inc. Business Background Report 2009). Euromonitor reports that the company's share in the global market of confectionery products is 4,6% (‘Kraft Foods Inc. proposes combination with Cadbury Plc’ 2009). Earlier, Hershey and the Ferrero were going to join the struggle for Cadbury, considering the possibility of submitting a joint proposal to buy the British confectioner. However, on January 19, 2010 Cadbury ceded to Kraft Foods, after the American food and drink manufacturer raised the bid price up to $19.4 billion (‘Cadbury agrees Kraft takeover bid’ 2010). The deal formed the world's largest confectionery manufacturer with the market share of 14,9% (Mars has 14,8%), annual sales of more than $50 billion, more than 40 brands (each with sales of more than $100 million per year) and leading positions in Brazil, China and Russia, where there is a significant presence of Kraft, as well as Mexico, India and South Africa, where Cadbury is more actively working. The companies expect that within three years after the merger the combined structure will reduce costs by $625 million per year (‘Kraft Foods Inc. proposes combination with Cadbury Plc’ 2009). Kraft now offers 840 pence for each share of Cadbury, of which 500 pence in money plus 0.1874 shares of new Kraft Foods. The document signed by the parties in particular states that the board of directors unanimously recommends that shareholders accept an improved offer of Kraft, ensuring that this proposal is beneficial to Cadbury shareholders. Cadbury also confirmed that the company's shareholders will receive an additional dividend of 10 pence per share (‘Cadbury shareholders...
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