Acquisition of Cadbury by Kraft: How Sweet is this Deal?

            
 
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Case Details:

Case Code : FINC076
Case Length : 18 pages
Period : 2010-2011
Pub. Date : 2012
Teaching Note : Available
Organization : Kraft Foods, Inc.; Cadbury Plc.
Industry : Food
Countries : Global; US; Europe

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Background Note

Kraft
Kraft was founded in 1903 as J.L. Kraft & Bros. After a number of mergers and acquisitions, J.L. Kraft & Bros became Kraft General Foods.

In 1995, during restructuring, Kraft and General Foods were amalgamated into Kraft Foods6, Inc and Kraft General Foods International became a subsidiary of Kraft Foods, Inc, which was renamed Kraft Foods International, Inc.

In 2001, Philip Morris offered an 18.1% stake in Kraft Foods Inc. to the public and the shares were listed on the New York Stock Exchange for public trading. The same year, Philip Morris put forward a proposal for a change in name to the Altria Group, Inc.

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The proposal was accepted and the name was changed in 2003. In March 2007, the Altria Group spun off Kraft and, as a result, Kraft began to trade as a fully independent company. In 2007, Kraft acquired the Paris-based global biscuit group Danone. The acquisition of Danone's business added a lot of diversity to Kraft...

Cadbury
The company was established in 1879 when John Cadbury (John) and his brother Benjamin began to sell chocolate drinks and solid chocolates in Bournville village. From inception till the year 1990, the company grew rapidly and expanded its business the world over. About the company and its products, Franklin Allen, professor of finance at the University of Pennsylvania's Wharton School, commented, "Cadbury "is just in the blood" in Europe, and especially in England."7

During the 1960s, the company expanded its business rapidly. During this period, Cadbury established new technologies and set up specialized plants for milk and cocoa bean processing in the UK. In 1969, it merged with Schweppes Limited to form Cadbury Schweppes plc. Schweppes Limited was a drink maker. During the year 1980, the company became one of the largest confectionery groups.

In 1995, the company turned into a leading independent bottler in the US after acquiring Dr Pepper/Seven Up Inc at US$1.7 billion. In 1999, Cadbury Schweppes acquired Hawaiian Punch, America's leading fruit punch brand, from the Procter & Gamble Company for US$203 million (126m). In 2003, Cadbury Schweppes acquired the US-based Adams chewing gum business for US$4.2 billion and became the world's number two chewing gum manufacturer. In the same year, it invested about 500 million in a small number of targeted bolt-on acquisitions in emerging markets and in brands with strong growth potential...

Excerpts - Next Page>>


6] Company history, www.fundinguniverse.com.
7] David Lieberman and Matt Krantz, "Is Kraft's $19B Cadbury Buy a Sweet Deal? Buffett has Doubts," www.usatoday.com, January 20,2010.


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