Kraft 2009 Annual Report Download - page 70

In May 2009, new guidance was issued on subsequent events that requires management to evaluate subsequent events through the date the
financial statements are either issued or available to be issued, depending on the company’s expectation of whether it will widely distribute its
financial statements to its shareholders and other financial statement users. Companies are required to disclose the date through which
subsequent events have been evaluated. We adopted the guidance effective June 30, 2009.
In June 2009, new guidance was issued on the consolidation of variable interest entities. The provisions are effective for Kraft Foods as of
January 1, 2010. This guidance improves the financial reporting by enterprises involved with variable interest entities. We do not expect the
adoption of this guidance to have a material impact on our financial statements.
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
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Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research℠