As outlined in Northfield, Ill.-based Kraft Foods' offer documentation, the offer represents a substantial premium to the unaffected share price of Cadbury, it [image-nocss] said. Kraft Foods said it believes that Cadbury and Kraft Foods "represent a uniquely complementary fit," And it said it believes that a combination with Cadbury "will provide the potential for meaningful revenue synergies and significant cost savings, delivering substantially more value than Cadbury could achieve on its own."
Kraft Foods also said it believes that its current trading and prospects are strong; however, since the announcement of its possible offer for Cadbury on Sept. 7, 2009, Kraft Foods believes its share price performance has been adversely affected by a number of deal-related factors of a short-term nature, which are expected to dissipate once there is clarity over the outcome of Kraft Foods' offer.
"In contrast with the value certainty and upside potential provided by the offer, Cadbury is asking its shareholders to put their faith in possible future value creation based on a set of long-term targets, never before achieved by Cadbury and subject to significant risk and uncertainty," said Kraft Foods. "Furthermore, Kraft Foods notes that Cadbury has chosen to concentrate on long-term targets, with very little information on its prospects for 2010."
In response to Kraft Foods' offer, Cadbury's board issued a defense document again rejecting "Kraft's wholly inadequate offer as it substantially undervalues Cadbury and recommend[ing] shareholders reject the offer."
It added, "The board is committed to maximizing shareholder value and believes that this is best achieved through the strong continuing performance of an independent Cadbury. Cadbury is a business with exceptional growth opportunities, reflecting its strong position as a unique pure-play confectionery business, with iconic brands and leading positions in the attractive confectionery market. Cadbury has also built the leading position in emerging markets, which has driven significant revenue growth and which we expect to drive strong growth in the future.... Kraft's offer fails to recognize the value of Cadbury's performance to date."
Roger Carr, chairman of Cadbury, said, "Cadbury is an exceptional business worth much more than the offer put forward by Kraft. It is clear to all that Cadbury is a particularly attractive asset in the sector with iconic brands, a sharp category focus and an enviable geographic footprint. We believe our shareholders should have the opportunity to reap the full rewards of the investment that has already been made in creating a platform for future improved revenue growth, enhanced profitability and high cash returns."
He concluded, "Kraft is trying to buy Cadbury on the cheap to provide much needed growth to their unattractive low-growth conglomerate business model. Don't let Kraft steal your company with its derisory offer."
(Click here for the full Cadbury defense document.)
Kraft Foods said, "Cadbury shareholders might wish to ask Cadbury the following questions, which are not addressed in Cadbury's defense document:
1. How will Cadbury deliver its new revenue growth targets?
2. How will Cadbury deliver its margin targets without further spending on restructuring?
3. Are Cadbury's margin goals achievable?
4. What is Cadbury's underlying cash flow?
(Click here for the full Kraft Foods statement.)
Commenting on the defense document, Irene B. Rosenfeld, chairman and CEO of Kraft Foods, said: "We have heard nothing from Cadbury that surprises us. Cadbury's defense document only reinforces our belief that there is a compelling strategic and financial rationale to combining these two companies and that doing so would be in the best interest of both companies' shareholders. Having said that, Kraft Foods will continue to maintain a disciplined approach with respect to the acquisition of Cadbury in line with the criteria outlined in our offer documentation."
Kraft Foods also announced that the applicable waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended) has now expired. Accordingly, the U.S. competition condition to the offer is now satisfied.
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