MERGER AND ACQUISITION

NIKHIL JIRANGE 16
MADHAVI PARMAR 38
DEEPIKA PAWAR 42
 MERGERS
A transaction where two firms agree to integrate their operations
because they have resources and capabilities that together may
create stronger competitive advantage.

 The term ‘merger’ refers to a combination of two or more

companies into a single company and this combination may be
either through consolidation or absorption.

The new company absorbs the assets, and possibly liabilities, of

both original companies which ceases to exist. When two firms
merge, stocks of both are surrendered and new stocks in the name
of new company are issued
 ACQUISITIONS
Acquisition refers to one company buying out another to combine the
bought entity within itself.

With acquisition, one firm takes over another and establishes its power
as the single owner. Generally, the firm which takes over is the bigger
and stronger one.

The relatively less powerful, smaller firm loses its existence, and the
firm taking over, runs the whole business with its own identity.

Unlike the merger, stocks of the acquired firm are not surrendered, but
bought by the public prior to the acquisition, and continue to be traded
in the stock market.
 CADBURY
British company started by Wealthy Quaker John Cadbury in 1824 as a
shop selling chocolates based drinks

His sons took the business into the big time building the Bourneville
development some 45yrs later

Cadbury began making the milk chocolates in 1897 & dairy milk in 1905.The
company made its first major takeover in 1921 buying rival Fry-another
landmark soon followed with production of its first filled egg product in1923.

As Quakers , the Cadbury family cared about the well- being of its staff,
setting new standards for working and living conditions in Victorian Britain
. By the mid-1930s,more than 100 acres around the Bourneville factory were
devoted to recreation.

When Cadbury bought the drinks firm Schweppes in 1969 it became

powerful force in the global food industry It sold its drink interest-now the
Dr Pepper Snapple company in 2008
 KRAFT FOODS
 It started in 1903 with a capital $65 as a wholesale cheese business inChicago
 
Mr. Kraft was on the brink of revolutionizing food manufacturing, not
only in Chicago, but around .the world.

1916, Kraft was granted a patent for what became known as process cheese
In 1920,Kraft entered the Canadian market by purchasing McLaren's
Imperial Cheese Co. Ltd
 
1945, the company name changed to Kraft 2000, acquired Nabisco
Holdings and combined the two food giants to become Kraft Foods Inc.

2001,Kraft stock began trading on the New York Stock Exchange under
the symbol “KFT.”

2007, Kraft Foods Inc. became a fully independent company

2008, Kraft Foods Inc. (KFT) replaced American International Group Inc.
(AIG) in the Dow Jones
 Cadbury Plc
Head Quartered Uxbridge, London and
Incorporated in 1824, Cadbury is Second
Largest confectionery company after Mars
- Wrigley having market share around 72%
in India under confectionary industry.
Kraft Foods Incorporation
Its world’s second largest food giant after
Nestle but doesn’t have good distribution chain
in Indian Food industry as well as Kraft Foods
Incorporation founded in 1903 having Head
Quarter at Northfield, Illinois.

Most popular brands sold by Cadbury in While Kraft has very little market in India for
India is Cadbury Dairy Milk, Perk, 5-star, its brands viz Kraft Cheese, Tang, Toblerone
Éclairs, Bournvita etc. etc. But all these products are sold in India
under imported products as Krafts has earlier
exited from India in back 2003.

In Comparisons to revenues as per the last While in this matter as Kraft is food giant its
year Cadbury having revenue around $8.8 last year Revenue was $42 Billion.
Billion

Employees working with Cadbury is now In Kraft Foods incorporation employee strength
more than 45500 employees is now more than 98000 employees
Takeover
Kraft acquired Cadbury on the 2nd February 2010. It acquired
Cadbury with an aim of increasing its global presence and revenue

Reasons behind the takeover (Planned or emergent)

Its ‘planned strategy’ was to acquire Cadbury Plc (one of its top
competitors) to increase market share and gain access to emerging
markets.

“Cadbury has been in Kraft's sights for a while, but the merger
took on new urgency after last year's $23-billion purchase of Wm.
Wrigley Jr. Co. by Mars Inc.” (Waldie, 2009)
 KRAFT AND CADBURY: BIDING
First Bid of £10.2bn ($16.7bn) on 7th Sep was rejected unequivocally
by Cadbury

Initial offer seems undervalues to Cadbury

Cadbury Said “Mars was paid 19.5 times EBITDA for Wrigley in May
2008, and arguably Cadbury has much more profit growth potential than
Wrigley had at that time.”

This leads Kraft to go public with the bid in order to “encourage and
further” the process. Shares of Cadbury soared 35 per cent at the start of
London trading on the news
U.K. patriots are horrified at the thought of a huge American
corporation taking over a British institution with a proud, independent
186-year history

This difference is partly accounted for by variations in local laws: In the

U.K., milk chocolate must contain at least 20 percent cocoa solids, while
in the U.S. the percentage can be as low as ten. Hershey's also says it
tailors its Cadbury recipes to American tastes for a sweeter product.

Chocolate fans are warning that Kraft's history of making what they call
"plastic cheese" spells doom for Cadbury's iconic, rich, creamy Dairy
Milk bars
 SECOND BID OF £11.5BN ($19.5BN)
Kraft Foods sealed a friendly deal & buy British candy maker Cadbury
at $19.5 billion (11.5 billion pounds).

Kraft's sold its North American pizza business for $3.7bn to Nestle
earlier this month to help raise the funds to pay for the Cadbury deal

Deal will make world’s largest chocolate maker, 2nd biggest gum
producer

Royal Bank of Scotland was prepared to lend money to Kraft to fund the
£11.5bn takeover bid.

The company has given no specific assurances over the future of 4,500
UK jobs.
Cadbury board has agreed to Kraft's improved offer of 840 pence $13.78
per Cadbury share

As per the revised offer Kraft offer 2,000 pence in cash and 0.7496 new
shares for each Cadbury ADS (American Depository Shares).

A Kraft-Cadbury combination will create a portfolio with more than

40 confectionery brands, each with annual sales in excess of $100 million

US food major Kraft Foods said it required only 50 per cent support from
Cadbury shareholders to take over the British confectioner.
Implications on Kraft and Cadbury after
acquisition:
Implications on Kraft Implications on Cadbury
Strengthened Brand Damaged Heritage
Drives higher performance leading to Lower moral and performance
higher revenue
Better control of the organisation Staff burn-out
Better reputation Risk of losing benefits schemes to
American procedures
Efficiencies through alignment of Trust Issues
procedures and processes
Alignment of goals Weakened Brand
 After deal effects:

•As deal is between two second largest companies now the new company will overtake
Mars Incorporation
•So many foreign companies were come to India for investment and also for making
good marketing chains in India as the Cadbury is having now.
•As the new company is formed revenues will also be increased. As per the new brand
name company’s estimated revenue will be around $90 to $100 billion each.
•As the earlier said that both the companies are second largest in their respective
market now combination this two will take lead position in Brazil, Russia, India, China
and Mexico.

•We all know that all the Mergers and Acquisition are not 100% satisfactory and 100%
good in nature. Now due to this Acquisition of Cadbury by Kraft, Kraft cut the jobs of
around 25000-30000 employees mainly of Cadbury Employees as well as there is so
many share holders of Cadbury are not satisfied with the deal.