Blog

Recommended Final Offer terms

• The board of Kraft Foods is pleased to announce the detailed terms of a recommended Final Offer for Cadbury and the board of Cadbury unanimously recommends Cadbury Securityholders to accept the terms of the Final Offer.
• Under the terms of the Final Offer, Cadbury Securityholders will be entitled to receive:

• In addition, Cadbury Shareholders will be entitled to receive 10 pence per Cadbury share by way of a Special Dividend following the date on which the Final Offer becomes or is declared unconditional.
• The terms of the Final Offer reflect the strength of Cadbury’s business, its brands and the future potential for growth through the combination of Kraft Foods and Cadbury.

An attractive valuation and substantial long-term value creation potential as part of the Combined Group

• Kraft Foods believes that the Final Offer represents a compelling opportunity for Cadbury Securityholders, providing the ability to receive approximately 60 per cent. of their consideration in cash and long-term value creation potential through a continued shareholding in the Combined Group.
• The Final Offer represents an attractive multiple of 13.0 times Cadbury’s underlying 2009 EBITDA.
• Kraft Foods believes a combination with Cadbury will provide the potential for meaningful cost savings and revenue synergies from which Cadbury Securityholders will benefit.

Combination creates a global leader in the global foods and confectionery sector

• Kraft Foods believes a combination represents a strong and complementary strategic fit, creating a global confectionery leader with a portfolio of more than 40 confectionery brands each with annual sales in excess of USD 100 million.
• Kraft Foods and Cadbury have a highly complementary geographic footprint, providing the Combined Group with a leading presence in attractive global markets.
• The Combined Group will have a leading position in developing markets, including in Brazil, Russia, India, China, and Mexico.
• The Combined Group will benefit from important additional scale in the consolidating confectionery segments.
• The Combined Group will have best-in-class infrastructure in both traditional and instant consumption routes to market.

Management and employees

• The combination will augment the world-class capabilities of both Kraft Foods and Cadbury by employing a “best of both” approach, from sales and marketing to distribution and management.
• In particular, Kraft Foods believes that the global business network of the Combined Group will create opportunities for Cadbury employees and managers.
• In addition, Kraft Foods has given assurances to Cadbury that, on the Final Offer becoming or being declared wholly unconditional, the existing contractual employment rights, including pension rights, of all employees will be fully safeguarded.

Further details of the Final Offer

• Kraft Foods also announces that it reserves the right to, and intends to, reduce the number of acceptances required to fulfil the Acceptance Condition from 90 per cent. to 50 per cent. plus one Cadbury Share on or after 26 January 2010.
• The Final Offer does not require the approval of Kraft Foods Shareholders. Accordingly, the condition relating to such approval, as set out in the Original Offer Documents, is treated as satisfied for the purposes of the Final Offer.
• Full acceptance of the Final Offer will result in the issue of 265 million New Kraft Foods Shares, representing approximately 18 per cent. of the existing issued share capital and 15 per cent. of the enlarged issued share capital of Kraft Foods.

Commenting on the Offer, Irene Rosenfeld, Chairman and CEO of Kraft Foods, said:

“We have great respect for Cadbury’s brands, heritage and people. We believe they will thrive as part of Kraft Foods. This recommended offer represents a compelling opportunity for Cadbury Shareholders, providing both immediate value certainty and upside potential in the combined company. For Kraft Foods Shareholders it transforms the portfolio, accelerates long-term growth and delivers highly attractive returns, while maintaining financial discipline.”

Commenting on the Offer, Roger Carr, Chairman of Cadbury, 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. We will now work with the Kraft Foods’ management to ensure the continued success and growth of the business for the benefit of our customers, consumers and employees.”

Cadbury Securityholders who have previously accepted the Original Offer (and have not withdrawn those acceptances) will automatically be deemed to have accepted the terms of the Final Offer by virtue of their prior acceptances and therefore need take no further action.

Other Cadbury Securityholders who wish to accept the recommended Final Offer must take action to accept the Final Offer by 1.00 pm (London time) / 8.00 am (New York City time) on 2 February 2010. Details of the procedure for doing so will be set out in the Final Offer Documents (and, in the case of certificated Cadbury Shares and Cadbury ADSs, the Final Acceptance Forms) to be sent to Cadbury Securityholders as soon as practicable. The Final Offer Documents will also be available on Kraft Foods’ website (www.transactioninfo.com/kraftfoods/).

This summary should be read in conjunction with the full text of the following announcement.

* The Offer is final and will not be increased, except that Kraft Foods reserves the right to increase the Offer if there is an announcement on or after the date hereof of an offer or a possible offer for Cadbury by a third party offeror or potential offeror.

Further information

This announcement is being made available on Kraft Foods’ website (www.transactioninfo.com/kraftfoods/). Copies of the Original Offer Document, the Prospectus, supplementary prospectuses and the Original US Offer Document, as applicable, are also available on Kraft Foods’ website. The Final Offer Documents and the related supplementary prospectus will be available on Kraft Foods’ website as soon as practicable.

The conditions to which the Offer is subject are set out in Appendix I to the Original Offer Document (Appendix A to the Original US Offer Document), and certain further terms of the Final Offer will be set out in the Final Offer Documents and the Final Acceptance Forms. Appendix I to this announcement sets out the sources and bases of certain financial and other information contained in this announcement. Appendix II to this announcement contains definitions of certain expressions and terms used in this announcement.

Lazard & Co., Limited, which is authorised and regulated in the UK by the FSA, is acting as financial adviser to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Lazard & Co., Limited, nor for providing advice in relation to the Offer or any matters referred to herein.

Centerview Partners UK LLP, which is authorised and regulated in the UK by the FSA, is acting as financial adviser to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Centerview Partners UK LLP, nor for providing advice in relation to the Offer or any matters referred to herein.

Citigroup Global Markets Limited, which is authorised and regulated in the UK by the FSA, is acting as financial adviser and corporate broker to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Citigroup Global Markets Limited, nor for providing advice in relation to the Offer or any matters referred to herein.

Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin – Federal Financial Supervisory Authority) and authorised and subject to limited regulation by the FSA. Details about the extent of Deutsche Bank AG’s authorisation and regulation by the FSA are available on request. Deutsche Bank AG, London Branch (and its affiliates) are acting as financial adviser and corporate broker to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Deutsche Bank AG, London Branch (or its affiliates), nor for providing advice in relation to the Offer or any matters referred to herein.

Each of Goldman Sachs International, Morgan Stanley & Co. Limited and UBS Investment Bank is acting exclusively for Cadbury and for no one else in connection to the matters referred to in this announcement and will not be responsible to anyone other than Cadbury for the providing the protections afforded to their respective clients nor for providing advice in relation to such matters.

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to this announcement or otherwise. The Offer is being made by the Original Offer Documents, the Final Offer Documents and the accompanying documentation. This announcement is not a prospectus and investors should not subscribe for any New Kraft Foods Shares except on the basis of information in the Prospectus (including the supplementary prospectuses) or the Registration Statement (as appropriate) which have been published and/or filed and which are available on Kraft Foods’ website (www.transactioninfo.com/kraftfoods/) from time to time. The New Kraft Foods Shares are not being offered to the public by means of this announcement.

This announcement has been prepared in accordance with English law and the Takeover Code and the information disclosed herein may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.

The release, publication or distribution of this announcement and any other applicable Offer-related documentation in jurisdictions other than the UK, the US, Canada, France, Ireland or Spain, and the availability of the Offer to Cadbury Securityholders who are not resident in the UK, the US, Canada, France, Ireland or Spain, may be affected by the laws or regulations of relevant jurisdictions. Therefore, any persons who are subject to the laws and regulations of any jurisdiction other than the UK, the US, Canada, France, Ireland or Spain, or Cadbury Securityholders who are not resident in such jurisdictions should inform themselves of and observe any applicable requirements.

The Offer is not being extended, and will not be extended, directly or indirectly, in or into, or by use of mails or any means or instrumentality (including, without limitation, electronic mail, facsimile transmission, telex, telephone, internet or other forms of electronic communication) of interstate or foreign commerce of, or any facilities of a national securities exchange of, any jurisdiction where to do so would violate the laws of that jurisdiction. Accordingly, copies of this announcement are not being, and must not be, directly or indirectly, mailed, transmitted or otherwise forwarded, distributed or sent in, into or from any Restricted Jurisdiction. Persons receiving this announcement (including, without limitation, custodians, nominees, and trustees) should observe these restrictions. Failure to observe these restrictions may render any purported acceptance of the Offer invalid.

Kraft Foods reserves the right to elect, with the agreement of Cadbury and the consent of the Panel (where necessary), to implement the acquisition of Cadbury by way of a court-approved scheme of arrangement in accordance with Part 26 of the 2006 Act. In such event, the acquisition will be implemented on substantially the same terms, subject to appropriate amendments, as those which apply to the Offer.

Notice to US investors

This announcement does not constitute, or form part of, any offer for, or any solicitation of any offer for securities, nor is it a solicitation of any vote or approval in any jurisdiction, nor will there be any purchase or transfer of the securities referred to in this announcement in any jurisdiction in contravention of applicable law or regulation.

The Offer is being made pursuant to applicable US tender offer rules and otherwise in accordance with the requirements of the Takeover Code. Accordingly, the Offer is subject to disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments that may be different from those typically applicable under US domestic tender offer procedures and law.

The receipt of cash and New Kraft Foods Shares pursuant to the Offer by a United States holder of Cadbury Shares may be a taxable transaction for United States federal income tax purposes and under applicable US state and local, as well as foreign and other tax laws. Each holder of Cadbury Shares is urged to consult his independent professional adviser regarding the tax consequences of acceptance of the Offer.

Cadbury is incorporated under the laws of England and Wales. All or some of the directors of Cadbury are residents of countries other than the United States. As a result, it may not be possible for Cadbury US Shareholders to effect service of process within the United States upon Cadbury or such directors of Cadbury or to enforce against any of such directors judgements of the United States predicated upon the civil liability provisions of the federal securities laws of the United States. It may not be possible to sue Cadbury or its officers or directors in a non-US court for violations of US securities laws.

Forward-looking statements

Certain statements contained or incorporated by reference in this announcement may constitute “forward-looking statements”. All statements in this announcement, other than those relating to historical information or current condition, are forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the control of Kraft Foods, that could cause Kraft Foods’ actual results to differ materially from those indicated in any such statements. Such factors include, but are not limited to, continued volatility of input costs, pricing actions, increased competition, Kraft Foods’ ability to differentiate its products from retailer brands, unanticipated expenses in connection with litigation, settlement of legal disputes, regulatory investigations or enforcement actions, Kraft Foods’ indebtedness and ability to pay its indebtedness, the shift in consumer preference to lower priced products, risks from operating outside the US, tax law changes, failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other Conditions of the Offer, adverse effects on the market price of Kraft Foods Shares and on Kraft Foods’ operating results because of a failure to complete the proposed acquisition, failure to realise the expected benefits of the proposed acquisition, significant transaction costs and/or unknown liabilities and general economic and business conditions that affect the Combined Group following the completion of the proposed acquisition. For more information on these and other factors that could affect Kraft Foods’ forward-looking statements, please also see the section entitled “Risk Factors” in the Prospectus or the Original US Offer Document, as applicable, and the risk factors in Kraft Foods’ filings with the SEC, including Kraft Foods’ most recently filed annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Kraft Foods disclaims and does not undertake any obligation to update or revise any forward-looking statement in this announcement except as required by applicable law or regulation.

Additional US-related information

Kraft Foods has filed the Registration Statement and tender offer documents with the SEC, which will be amended to reflect the terms of the Final Offer, and Cadbury will file an amendment to its solicitation / recommendation statement on Schedule 14D-9 in connection with the Offer. Cadbury US Shareholders, Cadbury Canadian Shareholders and Cadbury ADS Holders, wherever located, should read those filings, and any other filings to be made by Kraft Foods and Cadbury with the SEC in connection with the Offer as they contain important information. Those documents, as well as Kraft Foods’ other public filings with the SEC may be obtained without charge at the SEC’s website at www.sec.gov and at Kraft Foods’ website at www.kraftfoodscompany.com. In this announcement, Kraft Foods has presented the Offer by referring to multiples of Cadbury’s underlying earnings per share and underlying EBITDA under IFRS. Underlying earnings per share and EBITDA are non-US GAAP measures for IFRS purposes. The Registration Statement includes a discussion of the reasons why Kraft Foods’ management believes that Kraft Foods’ presentation of multiples of Cadbury’s underlying earnings per share and underlying EBITDA under IFRS provides useful information to Cadbury Securityholders and disclosure of the limitations of underlying earnings per share and EBITDA as an analytical tool.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION

For Immediate Release

19 January 2010

RECOMMENDED FINAL(1) OFFER

by

KRAFT FOODS INC. (“KRAFT FOODS”)

for

CADBURY PLC (“CADBURY”)

VALUING EACH CADBURY SHARE AT 840 PENCE

1. Introduction

The board of Kraft Foods is pleased to announce the detailed terms of a recommended Final(1) Offer to acquire the entire issued and to be issued share capital of Cadbury. The board of Cadbury unanimously recommends Cadbury Securityholders to accept the terms of the Final Offer.

2. The Final(1) Offer

Under the terms of the Final Offer, Cadbury Securityholders will be entitled to receive:

representing, in aggregate, 840 pence per Cadbury Share and GBP 33.60 per Cadbury ADS (based on the closing share price of USD 29.58 per Kraft Foods Share on 15 January 2010, the last trading day prior to the date of this announcement, and an exchange rate of USD 1.63 to GBP 1.00 as at 18 January 2010).

In addition, Cadbury has advised Kraft Foods that Cadbury Shareholders will be receiving 10 pence per Cadbury Share by way of a Special Dividend. This will, in effect, enable Cadbury Shareholders to receive 10 pence out of the planned final dividend of 12.3 pence per share previously announced by Cadbury, subject to board and shareholder approval, which would otherwise not become payable.(2)

Assuming the vesting and exercise of all share options and awards under the Cadbury Share Schemes:

• the Final Offer values the entire issued and to be issued share capital of Cadbury at approximately GBP 11.9 billion; and
• 265 million New Kraft Foods Shares will be issued (assuming full acceptance of the Final Offer), representing approximately 18 per cent. of the existing share capital and 15 per cent. of the enlarged share capital of Kraft Foods.

The terms of the Final Offer supersede those of the Original Offer. The terms of the Original Offer are no longer capable of acceptance. Further information in relation to the Final Offer is set out in sections 11 and 16 of this announcement.

Mix and Match Facility

Cadbury Securityholders who accept the Final Offer may make elections under the Mix and Match Facility. Under the Mix and Match Facility, accepting Cadbury Securityholders may elect to vary the proportions in which they receive New Kraft Foods Shares and cash consideration, subject to off-setting elections being made by other Cadbury Securityholders. To the extent that elections cannot be satisfied in full, they will be scaled down on a pro-rata basis.

Reduction of Acceptance Condition

Kraft Foods also announces that it reserves the right to, and intends to, reduce the number of acceptances required to fulfil the Acceptance Condition from 90 per cent. to 50 per cent. plus one Cadbury Share on or after 26 January 2010.

If the Acceptance Condition is satisfied and all other Conditions have been satisfied, fulfilled or, to the extent permitted, waived, the Offer will be declared wholly unconditional at that time and withdrawal rights will terminate (except in limited circumstances). Cadbury Securityholders who have already accepted the Offer, but whose willingness to accept the Offer is affected by the reduction of the Acceptance Condition, may wish to consider withdrawing their acceptances with respect to such Cadbury Shares promptly.

Condition regarding approval of Kraft Foods Shareholders

The issue of New Kraft Foods Shares pursuant to the Final Offer does not require the approval of Kraft Foods Shareholders. Accordingly, the condition relating to such approvals is treated as satisfied for the purposes of the Final Offer.

3. The creation of a global leader in the food and confectionery industry

The board of Kraft Foods believes that a combination of Kraft Foods and Cadbury represents a strong and complementary strategic fit, creating a global confectionery leader, with a portfolio including more than 40 confectionery brands, each with annual sales in excess of USD 100 million. Globally, the Combined Group would be number one in the chocolate and sugar confectionery segments and a strong number two in the high growth gum segment. Cadbury’s leading brands, such as Cadbury, Trident and Halls, are highly complementary to Kraft Foods’ portfolio and would benefit from Kraft Foods’ global scope, scale and array of proprietary technologies and processes. In addition, the acquisition of Cadbury will significantly enhance the strength of Kraft Foods’ presence in the confectionery sector, enabling Kraft Foods to leverage Cadbury’s product development capabilities.

Kraft Foods believes that confectionery markets are consolidating and scale is becoming increasingly important, in part due to retailers’ increasing bargaining power, control of the supply chain and growing portfolio of their own retailer brands, which have benefited from the global economic climate. The combination of Kraft Foods and Cadbury provides the Combined Group with important additional scale to compete even more effectively in the confectionery sector.

Kraft Foods and Cadbury have highly complementary geographic footprints. Importantly, a combination would increase scale for both companies in developing markets such as Brazil, Russia and China, where Kraft Foods has a stronger presence, and India, Mexico and South Africa, where Cadbury holds leading positions. The Combined Group would also benefit from an improved position across Europe, including in France and Spain.

Kraft Foods’ and Cadbury’s routes to market are also highly complementary. Kraft Foods is particularly strong in the grocery channel in North America and Western Europe, while Cadbury is well positioned in instant consumption channels, which have become increasingly important in both developed and developing markets. A combination provides an enhanced platform for the Combined Group to distribute both Cadbury’s and Kraft Foods’ products through both channels, creating an attractive opportunity for higher growth and margins.

4. The Final Offer represents an attractive opportunity for Cadbury Securityholders

The Final Offer equates to an enterprise value multiple of 13.0 times Cadbury’s underlying 2009 EBITDA(3), based on the closing share price of USD 29.58 per Kraft Foods Share on 15 January 2010, and an exchange rate of USD 1.63 to GBP 1.00 as at 18 January 2010. The enterprise value multiple is calculated assuming the exercise of all share options and vesting of all share awards held under the Cadbury Share Schemes.

5. Substantial synergy benefits

The combination of Kraft Foods and Cadbury is expected to provide the potential for meaningful revenue synergies over time from investments in distribution, marketing and product development. In addition, it is expected that pre-tax cost savings of at least USD 675 million annually can be realised by the end of the third year following completion. Total one-off implementation cash costs of approximately USD 1.3 billion are expected to be incurred in the first three years following completion.(4)

Both Kraft Foods and Cadbury have implemented extensive cost saving and operating efficiency programmes in recent years and have already delivered significant margin improvement and revenue growth improvements. These annual cost savings are still expected to be achieved over and above the current performance improvement plans at each of Kraft Foods and Cadbury (including Cadbury’s updated Vision into Action programme). While it is anticipated that these targeted savings will continue to be delivered, Kraft Foods believes that the Combined Group would be capable of achieving substantial further cost savings through economies of scale and procurement benefits, general and administrative cost savings and marketing and selling costs savings.

Cadbury Securityholders are able to share in the synergies resulting from the combination of Kraft Foods and Cadbury through the share component of the Offer.

6. Recommendation

The board of Cadbury, which has been so advised by Goldman Sachs International, Morgan Stanley & Co. Limited and UBS Investment Bank considers the terms of the Final Offer to be fair and reasonable. In providing their financial advice to the board of Cadbury, Goldman Sachs International, Morgan Stanley & Co. Limited and UBS Investment Bank have taken into account the board’s commercial assessments.

Accordingly, the board of Cadbury unanimously recommends Cadbury Securityholders to accept the terms of the Final Offer.

7. Financial effects of the transaction

Kraft Foods believes that the Final Offer will deliver the following key benefits:

• accretion to earnings per share in 2011 of approximately USD 0.05 on a cash basis; and(4)
• a mid teens return on investment, well in excess of Kraft Foods’ cost of capital(4).

• Kraft Foods believes that the Final Offer is consistent with its commitment to maintain a financially disciplined approach and is well within the key criteria outlined in Kraft Foods’ announcement of a possible offer for Cadbury on 7 September 2009:
• accretion to earnings in the second year following completion on a cash basis(3) (which excludes the one-time costs to achieve synergies and expenses related to the transaction and the impact of non-cash items such as the amortisation of intangibles after acquisition);
• a return on investment in excess of Kraft Foods’ cost of capital within an acceptable timeframe;(4)
• retention of Kraft Foods’ investment-grade credit rating; and
• maintenance of Kraft Foods’ dividend.

Following the combination with Cadbury, Kraft Foods expects to revise its long-term growth targets to 5+ per cent. for revenue and 9-11 per cent. for earnings per share, from its previously announced 4+ per cent. and 7-9 per cent. respectively.(4)

In addition, the acquisition is expected to enhance the quality of the Combined Group’s earnings, and create a business with strong discretionary cash flow generation and attractive revenue growth prospects across a diversified portfolio of brands and product groups worldwide.

8. Financing the cash consideration

Kraft Foods is providing the cash consideration payable by it under the Final Offer from its own resources, funds available from an amended bridge facility that has been arranged by a syndicate of banks and/or proceeds from alternative financing sources. A summary of the amended bridge facility will be included in the Final Offer Documents.

Lazard & Co., Limited, Centerview Partners UK LLP, Citigroup Global Markets Limited and Deutsche Bank AG, London Branch are satisfied that sufficient resources are available to Kraft Foods to satisfy in full the cash consideration payable by it as a result of full acceptance of the Final Offer.

9. Management, employees and locations

Kraft Foods believes that the combination of Cadbury and Kraft Foods represents a strong, complementary fit and expects that the combination will enhance the Combined Group’s growth profile(3). The combination will augment the world-class capabilities of both Kraft Foods and Cadbury by employing a “best of both” approach, from sales and marketing to distribution and management. In particular, Kraft Foods believes that the global business network of the Combined Group will create opportunities for Cadbury employees and managers.

In addition, Kraft Foods has given assurances to Cadbury that, on the Offer becoming or being declared wholly unconditional, the existing contractual employment rights, including pension rights, of all Cadbury Group employees will be fully safeguarded.

10. Kraft Foods offers an excellent investment opportunity

Kraft Foods believes that scale is important in the global food industry

As the world’s second largest food company, with 2008 revenues of USD 41.9 billion, Kraft Foods has significant global scale, with operations in more than 70 countries. While the US is a key market and Kraft Foods is the number one food company there based on retail sales, Kraft Foods generated approximately half of its revenues from outside the US in 2008 and sells its products in approximately 150 countries around the world.

Kraft Foods believes that its portfolio of leading brands is one of the strongest in the global food industry, with nine of its brands generating annual revenues exceeding USD 1 billion each. Kraft Foods’ objective is to be the category leader in its principal markets and it generates 80 per cent. of its revenues from categories in which it holds the number one position.

Over the past three years, Kraft Foods’ management has successfully re-positioned the company for sustainable, profitable growth by reframing its categories, capitalising on its established sales capabilities and driving down costs without compromising its commitment to high quality. Kraft Foods’ strategy is centred on marketing and developing leading consumer brands and pursuing growth opportunities to deliver shareholder value. Kraft Foods remains confident in meeting its long-term performance targets.

Kraft Foods has upgraded its EPS guidance

On 12 January 2010, Kraft Foods increased its guidance for 2009 diluted earnings per share, to at least USD 2.00 (up approximately five per cent. from 2008) versus the previous expectation of at least USD 1.97(5). This increased guidance reflects strong operating gains as well as a significant increase in marketing investments versus the prior year. Kraft Foods expects to achieve this level of diluted earnings per share while continuing to increase investment behind its brands, with advertising and consumer marketing spending expected to grow to approximately 7 per cent. of sales in 2009 from 6.7 per cent. of sales in 2008.

Kraft Foods’ share price

Since the announcement of its possible offer for Cadbury on 7 September 2009, Kraft Foods believes its share price performance has been adversely affected by a number of factors of a short-term nature, including: (i) concern that it will not maintain financial discipline regarding an acquisition of Cadbury; (ii) concern that the issuance of Kraft Foods Shares to certain Cadbury Securityholders may result in “flowback” of such shares; and (iii) short selling activity. Kraft Foods believes that, following completion of its acquisition of Cadbury, these short-term pressures on its share price should dissipate.

By way of illustration, Kraft Foods notes the following:

• Kraft Foods has historically traded on a current year price earnings multiple broadly in line with that of the S&P 500 Index. Based on Kraft Foods’ own guidance for its 2009 diluted earnings per share of at least USD 2.00(5), Kraft Foods’ historical 2009 price earnings multiple is 14.8 times as at 15 January 2010 (the last trading day prior to the publication of this announcement). The historical 2009 price earnings multiple of the S&P 500 Index is 24.4 times as at the same date;
• between 4 September 2009 (the last Business Day preceding the announcement of its possible offer for Cadbury) and 15 January 2010 (the last trading day prior to the publication of this announcement), the Kraft Foods Share price has increased by approximately 5.3 per cent. from USD 28.10 to USD 29.58. However, the S&P 500 Index has increased by approximately 11.8 per cent. over the same period;
• analysts’ consensus price target for Kraft Foods Shares is USD 32.67 and 92 per cent. of Kraft Foods’ current analyst recommendations are either a “buy” or a “hold”; and
• Kraft Foods Shares currently have a dividend yield of approximately 4 per cent.

11. Further information on the Final Offer

Cadbury Securityholders who have previously accepted the Original Offer (and have not withdrawn those acceptances) will automatically be deemed to have accepted the terms of the Final Offer by virtue of their prior acceptances and therefore need take no further action.

Other Cadbury Securityholders who wish to accept the recommended Final Offer must take action to accept the Final Offer by 1.00 pm (London time) / 8.00 am (New York City time) on 2 February 2010. Details of the procedure for doing so will be set out in the Final Offer Documents (and, in the case of certificated Cadbury Shares and Cadbury ADSs, the Final Acceptance Forms) to be sent to Cadbury Securityholders as soon as practicable. The Final Offer Documents will also be available on Kraft Foods’ website (www.transactioninfo.com/kraftfoods/).

In addition to offering the consideration made available under the terms of the Final Offer, Kraft Foods is continuing to provide: (a) accepting Cadbury Securityholders with the Mix and Match Facility, which Kraft Foods has determined will remain open until the end of the Subsequent Offer Period; (b) a facility under which accepting Cadbury Shareholders may elect to receive all cash consideration to which they are entitled in US dollars, if they do not wish to receive it in pounds sterling; (c) a facility under which accepting Cadbury ADS Holders may elect to receive all cash consideration to which they are entitled in pounds sterling, if they do not wish to receive it in US dollars; (d) a facility under which accepting Cadbury Shareholders will, subject to certain exceptions, receive New Kraft Foods Shares in the form of CDIs, which are capable of being held, transferred and settled in CREST; and (e) a designated UK agent to assist small shareholders resident in certain jurisdictions in holding, trading and managing their CDI interests in the New Kraft Foods Shares.

Further details of the Mix and Match Facility, currency elections and Kraft Foods CDIs are set out in the Original Offer Documents and further details of the Final Offer will be set out in the Final Offer Documents which will be sent to Cadbury Securityholders as soon as practicable. The Final Offer Documents are also being made available on Kraft Foods’ website (www.transactioninfo.com/kraftfoods/) and, together with the Final Acceptance Forms, on request from the Receiving Agent or the US Information Agent (as applicable).

12. Cadbury Share Schemes

The Final Offer extends to any Cadbury Shares unconditionally allotted or issued before the Final Offer closes (or such earlier time as Kraft Foods may, subject to the rules of the Takeover Code, decide) as a result of the exercise of options or vesting of awards granted under any of the Cadbury Share Schemes. Appropriate proposals will be made in due course to holders of options and awards granted under the Cadbury Share Schemes.

The benefit of Cadbury’s Special Dividend of 10 pence per share will be extended to participants in the Cadbury Share Schemes.

13. Break fee arrangement

Cadbury has agreed to pay an inducement fee of GBP 117.7 million in circumstances where a competing offer is announced and either is recommended by Cadbury or that offer or another third party offer becomes unconditional and the Final Offer lapses or is withdrawn, unless, prior to such announcement, Cadbury withdraws its recommendation for reasons demonstrably unrelated to such competing offer.

14. Overseas shareholders

The availability of the Final Offer and of the New Kraft Foods Shares to persons not resident in the UK, the US, Canada, France, Ireland or Spain may be affected by the laws or regulations of relevant jurisdictions. Such persons should inform themselves about and observe any applicable requirements. Further details in relation to overseas shareholders will be set out in the Final Offer Documents.

15. Small Dealing Facility

Subject to clarifying certain legal and regulatory considerations and with the agreement of the Panel, Kraft Foods has agreed to consider offering a free dealing facility to Cadbury Shareholders who own not more than 10,000 Cadbury Shares under which the New Kraft Foods Shares to which such Cadbury Shareholders become entitled under the Final Offer may be sold for their benefit at no cost. Details of such facility, if provided, will be communicated to Cadbury Shareholders in due course.

16. General and documentation

The Final Offer remains subject to the terms and conditions set out in Appendix I to the Original Offer Document (Appendix A to the Original US Offer Document) save that the Final Offer does not require the approval of Kraft Foods Shareholders and that European and US competition clearances have been obtained. The Final Offer also remains on and subject to the terms set out in the Original Offer Documents as such further terms have been revised in connection with the Final Offer as will be set out in the Final Offer Documents and Final Acceptance Forms. The relevant Final Offer Documents and Final Acceptance Forms will be sent to Cadbury Securityholders (other than to certain overseas shareholders) and, for information purposes, to persons with information rights and to participants in the Cadbury Share Schemes, as soon as practicable.

The procedure for accepting the terms of the Final Offer will be set out in the Final Offer Documents which are also being made available on Kraft Foods’ website (www.transactioninfo.com/kraftfoods/) and, together with the Final Acceptance Forms, on request from the Receiving Agent or the US Information Agent (as applicable). The Prospectus and any supplementary prospectuses in respect of the New Kraft Foods Shares are or, where applicable, will also be available on Kraft Foods’ website.

Appendix I to this announcement sets out the sources and bases of certain financial and other information contained in this announcement. Appendix II to this announcement contains definitions of certain expressions and terms used in this announcement.

(1) The Offer is final and will not be increased, except that Kraft Foods reserves the right to increase the Offer if there is an announcement on or after the date hereof of an offer or a possible offer for Cadbury by a third party offeror or potential offeror.

(2) The payment date for the Special Dividend will be 14 days following the date on which the Final Offer becomes or is declared wholly unconditional or such other date as Cadbury and Kraft Foods may agree. The payment of the Special Dividend will be conditional on the Final Offer becoming wholly unconditional.

(3) Underlying EBITDA is as defined by Cadbury. Cadbury Annual Reports and Accounts state that underlying figures include adjustments for restructuring costs, non-trading items, amortisation and impairment of acquisition intangibles, derivative accounting and any associated tax effect.

(4) Nothing in this announcement apart from the Profit Estimate is intended to be a profit forecast and no statement in this announcement should be interpreted to mean that the earnings per Kraft Foods Share for the current or future financial periods will necessarily be greater than those for the relevant preceding financial period.

(5) The updated diluted earnings per share profit estimate was announced on 12 January 2010 and reported on for the purposes of the Takeover Code by PricewaterhouseCoopers LLP and by the Financial Advisers. The updated profit estimate and copies of the accompanying reports will be set out in the Final Offer Document.

Further information

This announcement is being made available on Kraft Foods’ website (www.transactioninfo.com/kraftfoods/). Copies of the Original Offer Document, the Prospectus, supplementary prospectuses and the Original US Offer Document, as applicable, are also available on Kraft Foods’ website. The Final Offer Documents and the related supplementary prospectus will be available on Kraft Foods’ website as soon as practicable.

The conditions to which the Offer is subject are set out in Appendix I to the Original Offer Document (Appendix A to the Original US Offer Document), and certain further terms of the Final Offer will be set out in the Final Offer Documents and the Final Acceptance Forms. Appendix I to this announcement sets out the sources and bases of certain financial and other information contained in this announcement. Appendix II to this announcement contains definitions of certain expressions and terms used in this announcement.

Lazard & Co., Limited, which is authorised and regulated in the UK by the FSA, is acting as financial adviser to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Lazard & Co., Limited, nor for providing advice in relation to the Offer or any matters referred to herein.

Centerview Partners UK LLP, which is authorised and regulated in the UK by the FSA, is acting as financial adviser to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Centerview Partners UK LLP, nor for providing advice in relation to the Offer or any matters referred to herein.

Citigroup Global Markets Limited, which is authorised and regulated in the UK by the FSA, is acting as financial adviser and corporate broker to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Citigroup Global Markets Limited, nor for providing advice in relation to the Offer or any matters referred to herein.

Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin – Federal Financial Supervisory Authority) and authorised and subject to limited regulation by the FSA. Details about the extent of Deutsche Bank AG’s authorisation and regulation by the FSA are available on request. Deutsche Bank AG, London Branch (and its affiliates) are acting as financial adviser and corporate broker to Kraft Foods and no one else in connection with the contents of this announcement and the Offer and will not be responsible to any person other than Kraft Foods for providing the protections afforded to clients of Deutsche Bank AG, London Branch (or its affiliates), nor for providing advice in relation to the Offer or any matters referred to herein.

Each of Goldman Sachs International, Morgan Stanley & Co. Limited and UBS Investment Bank is acting exclusively for Cadbury and for no one else in connection to the matters referred to in this announcement and will not be responsible to anyone other than Cadbury for providing the protections afforded to their respective clients nor for providing advice in relation to such matters.

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to this announcement or otherwise. The Offer is being made by the Original Offer Documents, the Final Offer Documents and the accompanying documentation. This announcement is not a prospectus and investors should not subscribe for any New Kraft Foods Shares except on the basis of information in the Prospectus (including the supplementary prospectuses) or the Registration Statement (as appropriate) which have been published and/or filed and which are available on Kraft Foods’ website (www.transactioninfo.com/kraftfoods/) from time to time. The New Kraft Foods Shares are not being offered to the public by means of this announcement.

This announcement has been prepared in accordance with English law and the Takeover Code and the information disclosed herein may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.

The release, publication or distribution of this announcement and any other applicable Offer-related documentation in jurisdictions other than the UK, the US, Canada, France, Ireland or Spain, and the availability of the Offer to Cadbury Securityholders who are not resident in the UK, the US, Canada, France, Ireland or Spain, may be affected by the laws or regulations of relevant jurisdictions. Therefore, any persons who are subject to the laws and regulations of any jurisdiction other than the UK, the US, Canada, France, Ireland or Spain, or Cadbury Securityholders who are not resident in such jurisdictions should inform themselves of and observe any applicable requirements.

The Offer is not being extended, and will not be extended, directly or indirectly, in or into, or by use of mails or any means or instrumentality (including, without limitation, electronic mail, facsimile transmission, telex, telephone, internet or other forms of electronic communication) of interstate or foreign commerce of, or any facilities of a national securities exchange of, any jurisdiction where to do so would violate the laws of that jurisdiction. Accordingly, copies of this announcement are not being, and must not be, directly or indirectly, mailed, transmitted or otherwise forwarded, distributed or sent in, into or from any Restricted Jurisdiction. Persons receiving this announcement (including, without limitation, custodians, nominees, and trustees) should observe these restrictions. Failure to observe these restrictions may render any purported acceptance of the Offer invalid.

Kraft Foods reserves the right to elect, with the agreement of Cadbury and the consent of the Panel (where necessary), to implement the acquisition of Cadbury by way of a court-approved scheme of arrangement in accordance with Part 26 of the 2006 Act. In such event, the acquisition will be implemented on substantially the same terms, subject to appropriate amendments, as those which apply to the Offer.

Notice to US investors

This announcement does not constitute, or form part of, any offer for, or any solicitation of any offer for securities, nor is it a solicitation of any vote or approval in any jurisdiction, nor will there be any purchase or transfer of the securities referred to in this announcement in any jurisdiction in contravention of applicable law or regulation.

The Offer is being made pursuant to applicable US tender offer rules and otherwise in accordance with the requirements of the Takeover Code. Accordingly, the Offer is subject to disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments that may be different from those typically applicable under US domestic tender offer procedures and law.

The receipt of cash and New Kraft Foods Shares pursuant to the Offer by a United States holder of Cadbury Shares may be a taxable transaction for United States federal income tax purposes and under applicable US state and local, as well as foreign and other tax laws. Each holder of Cadbury Shares is urged to consult his independent professional adviser regarding the tax consequences of acceptance of the Offer.

Cadbury is incorporated under the laws of England and Wales. All or some of the directors of Cadbury are residents of countries other than the United States. As a result, it may not be possible for Cadbury US Shareholders to effect service of process within the United States upon Cadbury or such directors of Cadbury or to enforce against any of such directors judgements of the United States predicated upon the civil liability provisions of the federal securities laws of the United States. It may not be possible to sue Cadbury or its officers or directors in a non-US court for violations of US securities laws.

Forward-looking statements

Certain statements contained or incorporated by reference in this announcement may constitute “forward-looking statements”. All statements in this announcement, other than those relating to historical information or current condition, are forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the control of Kraft Foods, that could cause Kraft Foods’ actual results to differ materially from those indicated in any such statements. Such factors include, but are not limited to, continued volatility of input costs, pricing actions, increased competition, Kraft Foods’ ability to differentiate its products from retailer brands, unanticipated expenses in connection with litigation, settlement of legal disputes, regulatory investigations or enforcement actions, Kraft Foods’ indebtedness and ability to pay its indebtedness, the shift in consumer preference to lower priced products, risks from operating outside the US, tax law changes, failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other Conditions of the Offer, adverse effects on the market price of Kraft Foods Shares and on Kraft Foods’ operating results because of a failure to complete the proposed acquisition, failure to realise the expected benefits of the proposed acquisition, significant transaction costs and/or unknown liabilities and general economic and business conditions that affect the Combined Group following the completion of the proposed acquisition. For more information on these and other factors that could affect Kraft Foods’ forward-looking statements, please also see the section entitled “Risk Factors” in the Prospectus or in the Original US Offer Document, as applicable, and the risk factors in Kraft Foods’ filings with the SEC, including Kraft Foods’ most recently filed annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Kraft Foods disclaims and does not undertake any obligation to update or revise any forward-looking statement in this announcement except as required by applicable law or regulation.

Additional US-related information

Kraft Foods has filed the Registration Statement and tender offer documents with the SEC, which will be amended to reflect the terms of the Offer, and Cadbury will file an amendment to its solicitation / recommendation statement on Schedule 14D-9 in connection with the Final Offer . Cadbury US Shareholders, Cadbury Canadian Shareholders and Cadbury ADS Holders, wherever located, should read those filings, and any other filings to be made by Kraft Foods and Cadbury with the SEC in connection with the Offer as they contain important information. Those documents, as well as Kraft Foods’ other public filings with the SEC may be obtained without charge at the SEC’s website at www.sec.gov and at Kraft Foods’ website at www.kraftfoodscompany.com. In this announcement, Kraft Foods has presented the Offer by referring to multiples of Cadbury’s underlying earnings per share and underlying EBITDA under IFRS. Underlying earnings per share and EBITDA are non-US GAAP measures for IFRS purposes. The Registration Statement includes a discussion of the reasons why Kraft Foods’ management believes that Kraft Foods’ presentation of multiples of Cadbury’s underlying earnings per share and underlying EBITDA under IFRS provides useful information to Cadbury Securityholders and disclosure of the limitations of underlying earnings per share and EBITDA as an analytical tool.

(Logo: http://www.newscom.com/cgi-bin/prnh/20090420/KRAFTLOGO)

SOURCE Kraft Foods

RELATED LINKS
http://www.kraft.com