Kraft 2008 Annual Report Download - page 76

364-day bridge facility agreement, and at closing, we borrowed €5.1 billion under that facility in order to finance the acquisition. The acquisition included 32
manufacturing facilities and approximately 14,000 employees. Danone Biscuit generated global revenues of approximately $2.8 billion during 2007. We
acquired assets consisting primarily of goodwill of $5,239 million (which will not be deductible for statutory tax purposes), intangible assets of $2,196 million
(substantially all of which are expected to be indefinite lived), receivables of $759 million, property plant and equipment of $561 million and inventories of $198
million. These amounts represent the preliminary allocation of purchase price and are subject to revision when appraisals are finalized, which will occur during
2008. Danone Biscuit will report results from operations on a one month lag; as such, there was no impact on our operating results in 2007. On a proforma basis,
Danone Biscuit’s net earnings for the year ended December 31, 2007 would have been insignificant to Kraft.
United Biscuits:
In September 2006, we acquired the Spanish and Portuguese operations of United Biscuits (“UB”) for approximately $1.1 billion. The non-cash acquisition was
financed by our assumption of $541 million of debt issued by the acquired business immediately prior to the acquisition, as well as $530 million of value for the
redemption of our outstanding investment in UB, primarily deep-discount securities. The redemption of our investment in UB resulted in a $251 million gain. As
part of the transaction, we also recovered the rights to all Nabisco trademarks in the European Union, Eastern Europe, the Middle East and Africa, which UB had
held since 2000. The Spanish and Portuguese operations of UB include its biscuits, dry desserts and canned meats, tomato and fruit juice businesses. The
operations also include seven manufacturing facilities and 1,300 employees. These businesses contributed net revenues of approximately $466 million during the
year ended December 31, 2007. From September 2006 to December 31, 2006, these businesses contributed net revenues of approximately $111 million.
We acquired assets consisting primarily of goodwill of $730 million, intangible assets of $217 million, property plant and equipment of $149 million, receivables
of $101 million and inventories of $34 million.
Note 12. Divestitures:
Post Distribution:
On November 15, 2007, we announced a definitive agreement to merge our Post cereals business (“Post Business”) into Ralcorp Holdings, Inc. (“Ralcorp”) after
a tax-free distribution to our shareholders (the “Post Distribution”). We have signed an agreement with Ralcorp to execute the Post Distribution by means of a
“Reverse-Morris Trust” transaction. This transaction is subject to customary closing conditions, including anti-trust approval, IRS tax-free ruling and Ralcorp
shareholder approvals. To date, the anti-trust approval has been obtained. We anticipate that this transaction will be completed in mid-2008.
The Post Business had net revenues of approximately $1.1 billion in 2007 and includes such cereals as Honey Bunches of Oats, Pebbles, Shredded Wheat,
Selects, Grape Nuts and Honeycomb. The brands in this transaction are distributed primarily in North America. In addition to the Post brands, the transaction
includes four manufacturing facilities and certain manufacturing equipment. We anticipate that approximately 1,250 employees will join Ralcorp following the
consummation of the transaction.
Our shareholders will receive at least 30.3 million shares of Ralcorp stock after the Post Distribution and the subsequent merger of the Post Business with
Ralcorp. Based on market conditions prior to closing, we will determine whether the shares will be distributed in a spin-off or a split-off transaction. Either type
of transaction is expected to be tax-free to our U.S. shareholders. In a spin-off transaction, our shareholders would receive a pro rata number of Ralcorp shares. In
a split-off transaction, our shareholders would have the option to exchange their Kraft shares and receive Ralcorp shares at closing, resulting in a reduction in the
number of shares of our Common Stock outstanding. In addition, Kraft will receive approximately $960 million of cash-equivalent value, which will be used to
repay debt.
Discontinued Operations:
In June 2005, we sold substantially all of our sugar confectionery business for pre-tax proceeds of approximately $1.4 billion. The sale included the Life Savers,
Creme Savers, Altoids, Trolli and Sugus brands. We reflected the results of our sugar confectionery business prior to the closing date as discontinued operations
on the consolidated statements of earnings.
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Source: KRAFT FOODS INC, 10-K, February 25, 2008 Powered by Morningstar® Document Research℠