Press releases

 

Cadbury Publishes Further Reasons to Reject Kraft’s Offer

Includes headlines of outstanding 2009 financial performance†

Sets out why Kraft’s Offer remains fundamentally unattractive

The Board of Cadbury plc ("Cadbury" or the "Company") is today publishing its second response document (the "Response Document") following the offer (the "Offer") posted by Kraft Foods Inc. ("Kraft") on 4 December 2009. The Board has unanimously rejected Kraft’s wholly inadequate Offer and continues to recommend that shareholders take no action in relation to the Offer.

The Response Document published today sets out the latest estimate of our outstanding financial performance for 2009 and highlights our strong business momentum going into 2010.

Highlights of Cadbury’s 2009 performance

·         2009 performance is well ahead of market expectations, driven by strong growth in the fourth quarter and the savings generated by Cadbury’s Vision into Action business plan

o        5% base business revenue growth; up 11% on an actual currency basis‡^

o        Trading margin of 13.5%; up 155 bps on a constant currency basis and 160 bps on an actual currency basis*^‡

o        Full year dividend growth expected to be 10%

o        Further evidence of our management team’s strong track record of delivery

·         Strong second half performance and excellent momentum going into 2010

o        6% base business revenue growth for the second half of 2009‡

o        Sustained investment to support our long-term revenue growth target of 5-7% through investments in key growth drivers including our emerging market businesses and innovation capabilities

o        Specific activities to drive margin improvement in 2010, including additional benefits from the manufacturing reconfiguration programme and continuing SG&A reduction initiatives

·           Strong business momentum, combined with 6% compound average growth in revenues from 2004 to 2009‡ and 370 bps margin improvement since 2007*‡, provides the foundation for our enhanced long-term targets

Commenting on the 2009 performance, Todd Stitzer, Cadbury’s CEO said: “Our performance in 2009 was outstanding. We generated good revenue growth despite the weakest economic conditions in 80 years. At the same time, our Vision into Action plan drove a 160 basis point improvement in margin to 13.5%*‡, on an actual currency basis, delivering over 70% of our original target in half the time.”

“Looking forward to 2010, we are targeting revenue growth within our 5-7% goal range, led by new product innovations across our categories and supported by incremental investment in marketing. We expect benefits from our restructuring and reconfiguration actions in 2010 to drive continued progress to achieve our targets of good mid-teens margin by 2011 and 16-18% margin by 2013.”

The Response Document also sets out further reasons why Cadbury believes Kraft’s Offer is even more unattractive today than it was when they published the Offer in December.

Kraft’s Offer remains derisory

·         The Offer price values Cadbury at only 12.0 times 2009 EBITDA*‡

o        Lower than any comparable transaction in the sector (14.3 - 18.5 times EBITDA)

o        A significant discount to Kraft's own publicly stated branded food benchmark of 14 times EBITDA

·         Since Kraft's approach on 4 September, the Board believes that Cadbury’s standalone value has risen further

o        Cadbury's 2009 financial performance is ahead of previously upgraded expectations

o        Cadbury has set out upgraded targets for the next four years of its Vision into Action plan, including 5-7% revenue growth, 16-18% margin by 2013 and significantly higher levels of cash generation and returns

o        Equity markets globally have risen substantially

o        The share prices of Cadbury's peers have increased on average by 12%

·         The majority of the Offer consideration comprises Kraft’s shares; this is unappealing given Kraft’s unattractive business model and poor track record of delivery

o        Kraft has an unfocused, conglomerate business model with significant exposure to lower growth categories and a track record of missed financial targets

o        Kraft shares have significantly underperformed; down 42% compared to its peers since its IPO in June 2001

The Board of Cadbury is committed to maximising shareholder value and, against the background of the Kraft bid, believes that this is best achieved through the strong continuing performance of an independent Cadbury.

Roger Carr, Chairman of Cadbury, said: "Kraft’s Offer is even more unattractive today than it was when Kraft made its formal offer in December. Our 2009 performance is ahead of our previously upgraded expectations and we have excellent momentum going into 2010.”

"Kraft's offer is very significantly below all comparable transactions in the sector; applying any of the comparable multiples would imply a price per share far above Kraft’s offer. Over half the offer consideration is in the form of Kraft shares, exposing our shareholders to Kraft’s low growth conglomerate business model, its long history of underperformance and its track record of missed targets.”

“Don’t let Kraft steal your company with its derisory offer."

2009 summary unaudited financial performance to be published on 14 January 2010

As set out in the announcement of 7 January 2010, Cadbury will be publishing information on 2009 summary unaudited financial performance following the UK market close on 14 January 2010. The 2009 financial information will be incorporated into an update of the Response Document published today, along with certain supporting explanatory detail, which will be posted to shareholders as soon as possible thereafter.

* This statement includes a profit estimate based on the results included in the unaudited management accounts for the eleven months ended 30 November 2009 and the Cadbury Directors’ estimate of the results for the one month ended 31 December 2009, which take account of the Group’s preliminary view of sales and underlying profit from operations for that month. This statement is a profit estimate for the purpose of Rule 28 of the City Code. As such, it is a requirement that this statement be reported on by the Company's reporting accountants and financial advisers in accordance with Rule 28 of the City Code. The bases and assumptions behind the reports of the reporting accountant and financial advisers are set out in Appendix 2 of the Response Document. The reporting accountant and financial advisers have given and not withdrawn their consent to publication. 

† Neither this press release nor the Response Document constitutes or includes the Company’s preliminary statement of annual results (for the purposes of the Listing Rules made by the UK Listing Authority) or statutory accounts for the financial year ended 31 December 2009.

‡ Estimate to be confirmed or revised in the updated document that will be published after the market close on 14 January

^ Base business revenue is stated at constant currency and before acquisitions and disposals. Constant currency excludes the impact of exchange rate movements during the period.