Kraft 2009 Annual Report Download - page 202

Acquisitions and Divestitures:
Acquisitions and Divestitures:
(USD $)
12 Months Ended
12/31/2009
Acquisitions and Divestitures:
Note 2. Acquisitions and Divestitures:
Cadbury Acquisition:
On January 19, 2010, we announced the terms of our final offer for each outstanding ordinary share of Cadbury plc
(“Cadbury”), including each ordinary share represented by an American Depositary Share (“Cadbury ADS”), and the
Cadbury board of directors recommended that Cadbury shareholders accept the terms of the final offer. Under the
terms of the offer, we agreed to pay Cadbury shareholders 500 pence in cash and 0.1874 shares of Kraft Foods
Common Stock per Cadbury ordinary share validly tendered and 2,000 pence in cash and 0.7496 shares of Kraft
Foods Common Stock per Cadbury ADS validly tendered. This valued each Cadbury ordinary share at 840 pence
and each Cadbury ADS at £33.60 (based on the closing price of $29.58 for a share of Kraft Foods Common Stock
on January 15, 2010 and an exchange rate of $1.63 per £1.00) and valued the entire issued share capital of
Cadbury at £11.9 billion (approximately $19.4 billion) on January 15, 2010, the last trading day before the publication
of our final offer. The combination of Kraft Foods and Cadbury will create a global powerhouse in snacks,
confectionery and quick meals with a rich portfolio of iconic brands.
On February 2, 2010, all of the conditions to the offer were satisfied or validly waived, the initial offer period expired
and a subsequent offer period immediately began. At that point, we had received acceptances of 71.73% of the
outstanding Cadbury ordinary shares, including those represented by Cadbury ADSs. The subsequent offer period
remains open until further notice and at least 14 days of notice will be given if Kraft Foods decides to close the offer.
As of February 15, 2010, we had received acceptances of 1,262,356,520 shares representing 91.02% of the
outstanding Cadbury ordinary shares, including those represented by Cadbury ADSs. As we have received
acceptances of over 90% of Cadbury shares, we are n the process of acquiring the remaining Cadbury ordinary
shares that are not tendered in the offer, including those represented by Cadbury ADSs, through a compulsory
acquisition procedure under the United Kingdom Companies Act of 2006, as amended. Additionally, as a condition
of the EU Commission’s approval of the Cadbury acquisition, we are required to divest confectionary operations in
Poland and Romania. As part of our acquisition of Cadbury, we expensed approximately $40 million in transaction
related fees in 2009 as we incurred them, and we also incurred $40 million in financing fees in 2009 related to the
acquisition.
The accounting for our Cadbury acquisition was incomplete at the time we issued our financial statements.
Accordingly, it is impracticable for us to make certain business combination disclosures. At the time of filing, it was
impracticable for us to: A) Complete a reconciliation of Cadbury’s IFRS financial statements to U.S. GAAP.
Accordingly, we were unable to present the acquisition date fair value of assets acquired and liabilities assumed, or
assets and liabilities arising from contingencies. B) Calculate the amount of goodwill and intangibles acquired and
the total amount of goodwill that is expected to be deductible for tax purposes. C) Provide proforma segment
disclosures. And D) present supplemental proforma combined information on a U.S. GAAP basis for the most recent
period presented.
Pizza Divestiture:
On January 4, 2010, we entered into an agreement to sell the assets of our North American frozen pizza business
(“Frozen Pizza”) to Nestlé USA, Inc. (“Nestlé”) for total consideration of $3.7 billion. Our Frozen Pizza business is a
component of our U.S. Convenient Meals and Canada & North America Foodservice segments. The sale, which is
subject to customary conditions, including regulatory clearances, includes the DiGiorno, Tombstone and Jack’s
brands in the U.S., the Delissio brand in Canada and the California Pizza Kitchen trademark license. It also includes
two Wisconsin manufacturing facilities (Medford and Little Chute) and the leases for the pizza depots and delivery
trucks. It is estimated that approximately 3,400 of our employees will transfer with the business to Nestlé. We
anticipate that the transaction will close in the first quarter of 2010.
At December 31, 2009, the Frozen Pizza business did not meet the criteria to be considered held-for-sale. Beginning
in the first quarter of 2010, the results of the Frozen Pizza business will be presented as a discontinued operation in
our consolidated financial statements and prior periods will be restated in a consistent manner. The following reflects
the summary results for the Frozen Pizza business that will be treated as a discontinued operation going forward:
For the Years Ended December 31,
2009 2008 2007
(in millions)
Net revenues $ 1,632 $ 1,440 $ 1,278
Earnings from operations before
income taxes 341 267 237
Provision for income taxes (123) (97) (87)
Net earnings from operations of
the Frozen Pizza business $ 218 $ 170 $ 150
Earnings from operations before income taxes as presented exclude stranded overheads of $108 million in 2009,
$112 million in 2008 and $111 million in 2007.
Post Cereals Split-off:
Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research℠