Kraft 2009 Annual Report Download - page 22

Discussion and Analysis
Strategy
Our strategy is centered on marketing and developing leading consumer brands and pursuing growth opportunities consistent with consumer
trends in order to deliver shareholder value. Our increasing investment in snacks and quick meals and our portfolio of iconic brands aligns with
growing consumer interest in convenience products and premium brands. Our focus on snacks and confectionery products fits well within our
strategy of growth in instant consumption channels. Four priorities will shape our long-term strategy:
• focusing on growth categories to further transform into a leading snack, confectionery and quick meals company. This is being
achieved through exiting lower growth and / or lower margin businesses and reinvigorating high cash flow businesses to fund growth;
• expanding our footprint in developing markets to benefit from population growth trends, trading up by consumers and achieving the
scale to establish cost-efficient infrastructure in key geographies;
• expanding our presence in instant consumption channels in order to gain share versus grocery channels in the U.S. and European
Union; and
• enhancing margins by improving our portfolio mix and reducing costs while investing in quality.
Items Affecting Comparability of Financial Results
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 in 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.
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
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Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research℠