Filed by Kraft Foods Inc.
Pursuant to Rule 425
Under the Securities Act of 1933
Subject Company: Cadbury plc
Commission File No.: 333-06444
The following slide presentation is available at www.transactioninfo.com/kraftfoods and/or www.kraftfoodscompany.com and/or was otherwise disseminated by Kraft Foods Inc. on January 12, 2010.
Forward-Looking Statements
This slide presentation contains forward-looking statements regarding Kraft Foods offer to combine with Cadbury plc. Such statements include, but are not limited to, statements about the benefits of the proposed combination and other such statements that are not historical facts, which are or may be based on Kraft Foods plans, estimates and projections. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond Kraft Foods control, that could cause Kraft Foods actual results to differ materially from those indicated in any such forward-looking statements. Such factors include, but are not limited to, failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other conditions to the offer, and the risk factors set forth in Kraft Foods filings with the Securities and Exchange Commission (SEC), including the registration statement on Form S-4 filed by Kraft Foods in connection with the offer, 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 slide presentation, except as required by applicable law or regulation.
Additional US-Related Information
This slide presentation is provided for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell shares of Cadbury plc or Kraft Foods. Kraft Foods has filed a registration statement and tender offer documents with the SEC in connection with the offer. Cadbury plc shareholders should read those filings, and any other filings made by Kraft Foods with the SEC in connection with the proposed combination, 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 SECs website at www.sec.gov and at Kraft Foods website at www.kraftfoodscompany.com.
Kraft Foods
Building on a Global Powerhouse January 12, 2010 |
Forward-looking
statements 2 This slide presentation contains forward-looking statements regarding our offer to combine with
Cadbury, including but not limited to statements regarding our beliefs that: we will
have steady improvement in operating income margin; we are well positioned to deliver top-tier performance; driving high quality organic revenue growth, executing strong pipeline of cost-savings initiatives, increasing
investment in Sales, R&D, A&C; our targets of organic revenue growth of 4%+,
profit margins to industry benchmarks, EPS growth at high end of 7%-9%, and cash flow growth in excess of EPS growth; solid organic revenue growth going forward, good balance between volume/mix and pricing, sustainable growth objectives
for every geography, long-term organic revenue growth targets; a strong pipeline of
cost-savings initiatives target accelerated margin expansion, end-to-end productivity will better leverage scale, overhead cost reset will further expand margins, and A&C will continue to increase as a percent of net
revenue; our priorities of focusing on growth categories, including transforming into a
leading snack, confectionery and quick meals company, exit lower growth and/or lower margin businesses, reinvigorate high cash flow businesses to fund growth; expanding our footprint in developing markets, capitalize on population
growth trends, long-term opportunity as consumer "trade- up" to our
products, provide scale to invest in infrastructure in key geographies; expand presence in growing trade channels, Instant Consumption Channels ("ICC") continue to gain share versus traditional channels in U.S. and EU, increase access
to significant parts of our portfolio; enhance our margins, improve portfolio mix,
drive down costs while investing in quality; Cadbury will help accelerate Kraft Foods' strategic plans; Cadbury's footprint is highly complementary to Kraft Foods', increasing scale in developing markets for both companies; Cadbury
has strong infrastructure in instant consumption channels; a combination with Cadbury
provides the potential for meaningful revenue synergies and a significant opportunity to realize cost savings; the combination has the potential for meaningful revenue synergies with a highly complementary
geographic footprint, investments in distribution, marketing and product development,
and annual cost savings of at least $625 million, which is over and above current performance improvement programs at Kraft Foods and Cadbury, including Cadbury's Vision Into Action program; potential annual pre-tax cost
savings of $300 million of operational synergies, $200 million of general and
administrative synergies and $125 million of marketing and selling synergies have been identified thus far; we expect to achieve run-rate savings by the end of the third year; the total one-off implementation cash costs is $1.2 billion; we
have proven our ability to successfully integrate acquisitions; combined, we would be
the global leader in confectionary with a diversified portfolio of leading confectionary brands; our estimated global confectionary market shares as a combined company; this combination would further accelerate long-term
growth; our long-term targets of organic revenue growth and long-term EPS
growth; Kraft Foods delivers attractive and immediate value; provide Cadbury shareholders with both value certainty and the opportunity to participate in future upside of the combined company; we believe our offer is understated due to
recent share pressure; Kraft Foods is offering a significant premium; we believe that
Kraft Foods is by far the best partner for Cadbury; we have strong standalone operating and financial momentum; Kraft Food + Cadbury is a compelling strategic fit; the combination would further accelerate both companies'
long-term growth; our offer delivers attractive and immediate value to Cadbury
shareholders. These forward-looking statements are subject to a number of risks and uncertainties many of which are beyond our control that could cause our actual results to differ materially from those indicated in any such
forward-looking statements. Such factors include, but are not limited to, continued
volatility of input costs, pricing actions, increased competition, our ability to differentiate our products from retailer brands, unanticipated expenses in connection with litigation, settlement of legal disputes, regulatory investigations or
enforcement actions, our indebtedness and ability to pay our indebtedness, the shift in
consumer preference to lower priced products, risks from operating outside the U.S., tax law changes, failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other conditions to the
combination, adverse effects on the market price of our common stock and on our
operating results because of a failure to complete the combination, failure to realize the expected benefits of the combination, significant transaction costs and/or unknown liabilities and general economic and business conditions that
affect the combined companies following the combination. For additional information on
these and other factors that could affect our forward-looking statements, see the risk factors set forth in our filings with the U.S. Securities and Exchange Commission (the "SEC"), including our registration statement on
Form S-4 filed in connection with the offer, our most recently filed Annual Report
on Form 10-K and subsequent reports on Forms 10-Q and 8-K. We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this slide presentation, except as required by applicable law or
regulation. |
Forward-looking
statements Additional U.S.related information This announcement is provided for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell shares of Cadbury or Kraft Foods. Kraft Foods has filed a registration statement and tender offer documents with the SEC in connection with the offer. Cadbury shareholders who are U.S. or Canadian residents and holders of Cadbury American Depositary Shares, wherever located, should read those filings, and any other filings made by Kraft Foods with the SEC in connection with the proposed combination, 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 Responsibility Statement The directors of Kraft Foods each accept responsibility for the information contained in this document, save that the only responsibility accepted by them in respect of information in this document relating to Cadbury or
the Cadbury Group (which has been compiled from public sources) is to ensure that such information has been correctly and fairly reproduced and presented. Subject as aforesaid, to the best of the knowledge and belief of the directors of Kraft Foods (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of that information. 3 . www.kraftfoodscompany.com |
Agenda Kraft Foods: A Strong Base to Build On Kraft Foods + Cadbury: A Global Powerhouse Kraft Foods Offer 4 |
5 Three years ago, laid out four strategies to return Kraft Foods to sustainable growth Exploit Sales Capabilities Reframe Categories Balance Cost & Quality Rewire for Growth |
6 Reframe Categories Successfully executed our turnaround despite a difficult environment Strengthened senior leadership team Decentralized to create accountable business units Revised incentive systems with right metrics Enhanced relevance of core brands Rebuilt our innovation pipeline Increased value-oriented marketing Strengthened our category mix Focused investments on priority categories, core brands, key markets Rewire for Growth |
7 Successfully executed our turnaround despite a difficult environment (continued) Leveraging our scale in the marketplace Established Wall-to-Wall in the U.S. Taking Wall-to-Wall to next level with High Visibility Wall-to-Wall Expanded reach in growing trade channels Improved coverage in traditional trade Improved product quality from parity to vastly preferred Leveraged tailwind of restructuring program to invest in growth Moved to a model of continuous improvement Exploit Sales Capabilities Balance Cost & Quality |
8 Growth from volume/mix improving sequentially Product line discontinuations Volume/Mix Easter Shift (3.4)pp 0.2 pp 0.7 pp ~(0.8)pp ~(1.0)pp ~(0.8)pp ~(0.8)pp ~0.8 pp Q1 09 Q2 09 Q3 09 |
9 Steady improvement in operating margins Operating Income Margin Q108 Q109 Q208 Q209 Q308 Q309 11.8% 13.5% 11.8% 15.0% 15.1% 14.5% 10.6% 13.2% 9.8% Reflects reported operating income margins in Q1, Q2 and Q3 2008. See GAAP to Non-GAAP reconciliation at the end of this presentation. Reflects operating income margins excluding items in Q1, Q2 and Q3 2008
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10 Cash flow up strongly Improved gains from working capital efficiency programs and disciplined management of capital expenditures $2.2 $2.4 FY07 FY08 $2.7 9 Months Ending 30 September 2009 Discretionary Cash Flow ($ billions) * Excluding Post cereals and adjusted for the timing of deferred interest payments. See
GAAP to Non-GAAP reconciliation at the end of this presentation. * |
11 Well-positioned to deliver top-tier performance Driving high quality organic revenue growth Executing strong pipeline of cost-savings initiatives Increasing investment in Sales, R&D, A&C Targets Organic revenue growth of 4%+ Profit margins to industry benchmarks EPS growth at high end of 7%-9% Cash flow growth in excess of EPS growth |
12 Solid organic revenue growth going forward Good balance between volume/mix and pricing Sustainable growth objectives for every geography North America 3-5% Europe 1-3% Developing Markets 8-10% Total Kraft Foods 4%+ Long-Term Organic Revenue Growth Targets |
13 A strong pipeline of cost-savings initiatives target accelerated margin expansion * End-to-End Productivity will better leverage scale Overhead Cost Reset will further expand margins A&C will continue to increase as a percent of net revenue (1) Reflects Operating Income Margin ex. Items. Reported 2008 Operating Income Margin was
9.2%. See GAAP to Non-GAAP Reconciliation at the end of this
presentation. Operating Income Margin 2008 2011 Target 12.3% (1) Mid-Teens * Nothing in this presentation is intended to be a profit forecast and the statements in this
presentation should not 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. |
14 Focus on growth categories Transform into a leading snack, confectionery and quick meals company Exit lower growth and/or lower margin businesses Reinvigorate high cash flow businesses to fund growth Four priorities shape Kraft Foods long-term strategy Growth Categories Expand footprint in Developing Markets Capitalize on population growth trends Long-term opportunity as consumers trade-up to our products Provides scale to invest in infrastructure in key geographies Expand presence in growing trade channels Instant Consumption Channels (ICC) continue to gain share versus traditional channels in U.S. and EU Increase access to significant parts of our portfolio Enhance margins Improve portfolio mix Drive down costs while investing in quality Developing Markets Growing Channels Margin Expansion |
Agenda Kraft Foods: A Strong Base to Build On Kraft Foods + Cadbury: A Global Powerhouse Kraft Foods Offer 15 |
16 Cadbury has a strong portfolio with leading market positions in the fast-growing confectionery category Cadbury will help accelerate Kraft Foods strategic plans Developing Markets Growth Categories Growing Channels Cadburys footprint is highly complementary to Kraft Foods, increasing scale in developing markets for both companies Cadbury has strong infrastructure in instant consumption channels A combination with Cadbury provides the potential for meaningful revenue synergies and a significant opportunity to realize cost savings Margin Expansion |
This combination
would provide for meaningful synergies and cost savings Potential for meaningful revenue synergies A highly complementary geographic footprint Investments in distribution, marketing and product development Annual cost savings of at least $625 million* Over and above current performance improvement programs at Kraft Foods and Cadbury Including Cadbury's Vision Into Action program Potential annual pre-tax cost savings identified thus far: $300 million of operational synergies $200 million of general and administrative synergies $125 million of marketing and selling synergies Expect to achieve run-rate savings by end of third year Total one-off implementation cash costs of $1.2 billion 17 * There are several material assumptions underlying the synergies estimate which might therefore be
materially greater or less than those estimated. This estimate of cost synergies
was announced on 7 September 2009, and repeated in the offer documentation published on 4 December 2009, and has been reported on under the U.K. Takeover Code by Ernst & Young LLP and by Lazard & Co.,
Limited. Copies of their reports are included in Appendix V of the U.K. offer
document dated 4 December 2009, which can be found at www.transactioninfo.com/kraftfoods, and the Form 8-K filed with the SEC on 4 December 2009. The estimate of cost synergies should be read in conjunction
with Appendix II of that announcement, which contains, among other information, certain
key assumptions underlying the estimate. The board of Kraft Foods confirms that the synergies estimate remains valid for the purposes of the offer and that Ernst & Young LLP and Lazard & Co.,
Limited have indicated that they have no objection to their reports continuing to apply.
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18 We have proven our ability to successfully integrate acquisitions Expansion of global core category, providing strong third leg in Europe and increased Developing Markets presence Added $2.6B in revenue and $400MM in operating profit Synergies ahead of plan Acquisition of Spain and Portugal biscuit business, bringing European manufacturing base and return of Nabisco trademarks Added $400MM in revenue and $70MM in operating profit Integration proceeded on track Entered rapidly growing snacks category Increased worldwide revenues by 30% Scale step up in Latin America and to lesser extent Asia Pacific Smooth integration, synergies exceeded original targets GROUP DANONES GLOBAL BISCUIT BUSINESS (2007) UNITED BISCUITS IBERIAN OPERATIONS (2006) NABISCO (2000) |
Combined, we would
be the global leader in confectionery
Kraft Foods + Cadbury Mars Wrigley Cadbury Nestlé Kraft Foods Hershey Ferrero Perfetti Van Melle Lindt & Sprungli 14.8% 14.6% 10.1% 7.8% 4.7% 4.5% 4.5% 2.9% 2.0% Chocolate 15.2% 14.6% 6.9% 12.6% 8.3% 6.7% 7.3% NA 3.6% Gum 28.9% 35.4% 28.8% 0.1% 0.1% 0.6% NA 6.8% NA Sugar Confectionery 7.6% 5.0% 7.3% 2.6% 0.3% 2.6% 1.5% 6.4% NA Global Confectionery Market Shares Global Share
we all know that the world of retailers is consolidating and its better to have a stronger position when youre standing in front of your retail partner to say, we can be your category captain and leader as it relates to confectionery. Todd Stitzer, Cadbury CEO, 16 September 2009 19 Source: Euromonitor 2008. |
with a diversified portfolio of leading confectionery brands Key global brands led by Milka, Cadbury, Trident and Halls 40+ confectionery brands over $100 million with iconic status in respective markets Chocolate Kraft Foods Gum Candy Cadbury 20 |
This combination
would further accelerate long-term growth Organic Revenue Growth 4%+ 5%+ Long-Term EPS Growth* 7% - 9% 9% - 11% Long-Term Targets 21 * Nothing in this presentation is intended to be a profit forecast and the statements in this
presentation should not 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. Kraft Foods + Cadbury Kraft Foods |
Agenda Kraft Foods: A Strong Base to Build On Kraft Foods + Cadbury: A Global Powerhouse Kraft Foods Offer 22 |
Kraft Foods
delivers attractive and immediate value 300p in cash and 0.2589 Kraft Foods shares per Cadbury share Values each Cadbury share at 767p based on the 8 January 2010 closing stock prices and exchange rates (1) Shareholders may elect to accept an additional 60p in cash in lieu of a similar value of Kraft Foods shares under the partial cash alternative Provides Cadbury shareholders with both value certainty and the opportunity to participate in future upside of combined company Through the partial cash alternative and a mix-and-match facility, Cadbury shareholders have the opportunity to receive a higher proportion of their consideration as cash or stock 1) Based on Kraft Foods stock price of $28.93 as of 8 January 2010, and an exchange rate of 1.6022 $/£. 23 |
We believe our
offer is understated due to recent share pressure Short interest has increased sharply since the announcement of the Kraft Foods offer on 4 September (a) Source: Bloomberg. Short interest KFT stock price 24 |
Kraft Foods is
offering a significant premium Premia to Cadburys Recent Trading Levels Offer of 767p per Ordinary Share or $49.19 per ADR (a) 568p $37.46 35% 31% 555p $36.68 38% 34% 524p $34.66 46% 40% 4 September (b) 90-Day Average Ending 4 September (b) 3 July (c) 25 Price per ordinary share Price per ADR (a) Reflects Kraft Foods closing stock price as of 8 January 2010 of $28.93 and a $/£ exchange rate
of $1.6022. (b) The last business day preceding the announcement by Kraft Foods of a possible offer for Cadbury.
(c) The day prior to analyst suggestions regarding potential sector consolidation.
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We believe that
Kraft Foods is by far the best partner for Cadbury We have strong standalone operating and financial momentum Kraft Foods + Cadbury is a compelling strategic fit The combination would further accelerate both companies long-term growth Our offer delivers attractive and immediate value to Cadbury shareholders 26 |
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GAAP to
Non-GAAP Reconciliation 28 As Reported (GAAP) Asset Impairment, Exit and Implementation Costs - Restructuring Asset Impairments / Other Expenses - Non-Restructuring (Gains) / Losses on Divestitures, Net Excluding Items (Non-GAAP) Kraft Foods Net Revenues 41,932 $ - - - 41,932 $ Operating Income 3,843 $ 989 223 92 5,147 $ Operating Income Margin 9.2% 12.3% Kraft Foods Reconciliation of GAAP to Non-GAAP Information Operating Income Margin For the Twelve Months Ended December 31, 2008 ($ in millions) (Unaudited) |
GAAP to
Non-GAAP Reconciliation 29 For the Three Months Ended: As Revised (GAAP) Asset Impairment, Exit and Implementation Costs - Restructuring Asset Impairments / Other Expenses - Non- Restructuring (Gains) / Losses on Divestitures, net Excluding Items (Non-GAAP) March 31, 2008 Net Revenues 10,046 $ - - - 10,046 $ Operating Income 1,067 $ 98 3 18 1,186 $ Operating Income Margin 10.6% 11.8% June 30, 2008 Net Revenues 10,804 $ - - - 10,804 $ Operating Income 1,423 $ 121 1 74 1,619 $ Operating Income Margin 13.2% 15.0% September 30, 2008 Net Revenues 10,401 $ - - - 10,401 $ Operating Income 1,023 $ 90 112 1 1,226 $ Operating Income Margin 9.8% 11.8% Kraft Foods Inc. Operating Income Margins ($ in millions, except percentages) (Unaudited) |
GAAP to
Non-GAAP Reconciliation 30 9 Months Ending 2007 2008 Sep. 30, 2009 Net Cash Provided by Operating Activities (GAAP) 3.6 $ 4.1 $ 3.3 $
Capital Expenditures (1.2) (1.4) (0.7) Voluntary Pension Contribution 0.1 - 0.2 Discretionary Cash Flow 2.4 $ 2.8 $ 2.7 $
Discretionary cash flow from the Post cereals business (0.2) (0.1) - Timing of Deferred Interest Payments on debt issuances for the LU Biscuit acquisition - (0.3) - Discretionary Cash Flow excluding Post cereals and adjusted for Timing of Deferred Interest Payments 2.2 $ 2.4 $ 2.7 $
(1) May not add due to rounding Kraft Foods Reconciliation of GAAP to Non-GAAP Information Cash Flows For the Twelve Months Ended December 31, ($ in billions) (Unaudited) (1) |