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.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• 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.

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