Acquisition of Cadbury by Kraft: How Sweet is this Deal?

            
 
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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Case Details:

Price:

Case Code : FINC076 For delivery in electronic format: Rs. 500;
For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges

Themes: Mergers & Acquisitions / Valuation of company / Evaluation of Strategy

Case Length : 18 Pages
Period : 2010-2011
Pub. Date : 2012
Teaching Note : Available
Organization : Kraft Foods, Inc.; Cadbury Plc.
Industry : Food
Countries : Global; US; Europe

Abstract:

This case deals with the hostile takeover of UK-based Cadbury Plc (Cadbury) by the US-based Kraft Foods (Kraft). The final takeover price was 11.9 billion (US$19.7 billion). Cadbury was the world's second largest confectionery company. It had established a strong presence in emerging markets and globally held the sixth position in the chocolates market. Cadbury had been facing a financial crisis over the previous few years and the revenue of the company had declined. In early 2010, Cadbury was finally acquired by Kraft which felt that there were a lot of synergies in this acquisition. But one year after the deal, with Cadbury failing to meet Kraft's top line growth objectives and the company being behind in its debt reduction plans, industry observers were beginning to question whether Kraft's strategy of acquiring Cadbury was a wise one.

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

Issues:

  • To understand the types of mergers and acquisitions and why Kraft decided to acquire Cadbury.
  • To critically analyze Kraft's decision to acquire Cadbury and evaluate its decision of acquiring the company.
  • To take stock of the company's performance after one year and suggest remedial action.
  • Contents:

      Page No.
    Introduction 1
    Background Note 1
    Strategies to Win the Deal 3
    Synergies of the Deal 5
    Major Problems 5
    The Road Ahead 6
    Exhibits 7

    Keywords:

    Mergers & Acquisitions, Rationale, Synergies, Hostile takeover, Calculation of the Expected Present Values, Free cash flow to firm, Free cash flow to equity, Calculation of the expected cash, equity movements, and Balance Sheet, Preparation of the expected Profit and Loss accounts, Valuation of company, Strategy, Evaluation of Strategy, Cadbury, Kraft

    Introduction - Next Page>>


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