Kraft's Takeover of Cadbury

Kraft's Takeover of Cadbury
Case Code: BSTR388
Case Length: 24 Pages
Period: 2008-2010
Pub Date: 2011
Teaching Note: Not Available
Price: Rs.500
Organization: Cadbury Plc, Kraft Foods Inc
Industry: Consumer Packaged Goods
Countries: UK, US, Global
Themes: Merger and Acquisition, Takeover, International Business
Kraft's Takeover of Cadbury
Abstract Case Intro 1 Case Intro 2 Excerpts

American Food Major Takes Over British Icon

In February 2010, Illinois, USA-based Kraft Foods Inc. (Kraft) acquired London, UK-based Cadbury Plc (Cadbury) in what was considered to be one of the biggest cross-border acquisitions of the year. With the acquisition, Kraft aimed to become a market leader in the global confectionery market and gain access to emerging markets.., The Cadbury-Kraft combination boasted of a joint portfolio of more than 40 confectionery brands, each with expected annual sales of more than US$100 million. Cadbury accepted Kraft's £ 11.9 billion (US$19.7 billion) takeover offer after a takeover battle that lasted more than 100 days. Under the terms of the proposal, Kraft paid 840 pence ($13.70) for each Cadbury share -- 500 pence in cash and the rest in stock.

Shareholders of Cadbury also got a 10 pence special dividend, bringing the total to 850 pence. Talking about the offer, Cadbury Chairman Roger Carr (Carr) said, "We believe the offer represents good value for Cadbury shareholders and are pleased with the commitment that Kraft Foods has made to our heritage, values, and people throughout the world."

Cadbury was the second biggest confectionery group in the world. The company manufactured and marketed mainly three kinds of confectionery products - chocolate, gum, and candy. The company's largest brands were Diary Milk in chocolate, Trident in gum, and Halls in candy. Other important brands included Creme Egg, Flake and Green & Black's (organic chocolate line), Hollywood, Stimorol, Dentyne, Eclairs, Bubbaloo, Clorets, Flake, Hollywood, Stimorol, and Trident.

Kraft was the world's second largest food company and manufactured and marketed packaged food products, including snacks, beverage, cheese, convenient meals, and packaged grocery products. Some of its well-known brands were Kraft cheeses and dressings, Nabisco cookies and crackers, Oreo cookies, Jacobs and Maxwell House coffees, Philadelphia cream cheeses, Toblerone and Milka chocolates, LU biscuits, and Oscar Mayer meats.

According to some industry observers, the Kraft-Cadbury deal would unite the iconic brands of both the companies to create a global confectionery giant. While the deal would help Kraft in increasing its market share and overseas growth, it would enable Cadbury to reach new markets and establish its presence in the US confectionery market. According to Kraft, the economies of scale provided by the Kraft and Cadbury combination would allow it to increase sales and distribution, and deliver about US$1 billion (£640m) in revenue synergies.

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