Cadbury

British company started by Wealthy Quaker John Cadbury in 1824

Started as a shop selling chocolates based drinks

His sons took the business into the big time building the Bournville 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 in
1923.

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

When Cadbury bought the drinks firm Schweppes in 1969 it became powerful
force in the global food industryIt sold its drink interest-now the Dr Pepper
Snapplecompany in 2008

Kraft foods

It started in 1903 with a capital $65

Started as a wholesale cheese business in Chicago

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 cheeseIn
1920,Kraft entered the Canadian market by purchasing MacLaren’s Imperial
Cheese Co. Ltd

1945, the company name changed toKraft 2000, acquiredNabisco 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 Kraft and Cadbury: How they compare

Kraft: the world's second-biggest confectionery company will form part of the
world's second- largest food company.

Kraft currently manufactures and supplies about 40 food brands across the
world, ranging from confectionery products such as Oreo biscuits and Toblerone to
Kenco coffee, Philadelphia cream cheese and frozen pizza.

Cadbury sells chocolate, sweets and chewing gum around the world. Chocolate
brands includeits signature Dairy Milk bar, as well as Trident
chewing gum and Halls cough sweets
Why merger
After the Second World War, Cadbury joined with US drinks giant Schweppes
in
the 1960s as it looked to expand overseas,but the firms split in 2008

Kraft has been touted as a possible buyer for Cadbury ever since it demerged its
US soft drinks business in May last year, leaving it vulnerable to a takeover.
.
A month earlier, Cadbury lost its status as global confectionery leader after Mars
paid $23bn for Wrigley's global business As per Kraft CEO, Irene Rosenfeld,
combination of these two companies will increasinglyconsolidation in the
confectionery industry andstandalone Cadbury “has limited opportunities for value
creation”.

Kraft would also benefit from Cadbury’s broad geographical reach, in particular
its strongposition in the developing Indian and Mexican
markets

Cadbury would profit from Kraft’s extensive distribution network in Russia,

China and Brazil, according to Rosenfeld Kraft and Cadbury:
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 leadsKraft to go public with the bid in order to “encourage and further” the
process. Sharesof Cadbury soared 35 per cent at the start of
London trading on the news

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 leadsKraft to go public with the bid in order to “encourage and further” the
process. Sharesof 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 atleast 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 to buy British candy maker Cadbury for about
$19.5 billion (11.5 billionpounds) after frantic last-minute talks broke an
impasseover price.
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 would 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 today said it required only 50 per cent support from
Cadbury shareholders to take over the British confectioner.

British Prime Minister Gordon Brown pledged to "do everything we can" to

secure jobs at chocolate maker Cadbury, the day after it accepted a takeover bid
from US giant Kraft FoodsKraft Foods sealed a friendly deal to buy British candy
maker Cadbury for about $19.6 billion (11.5 billion pounds) after frantic last-
minute talks broke an impasse over price.
Cadbury board has agreed to Kraft's improved offer of 840 pence ($13.78) per
Cadbury share

As per the revised offer Kraft would offer 2,000 pence in cash and 0.7496 new
shares for each Cadbury ADS (American Depository Shares
Kraft-Cadbury: Making Acquisitions Work
Most acquisitions don't deliver the expected results, according to RHR Intl's
research. Here's how both companies' leadership can boost the chances for
success

After months of negotiations, Kraft (KFT) announced last month that it would acquire U.K.
confection giant Cadbury (CBY) with a revised bid of $19.5 billion. The acquisition of Cadbury
by Kraft will generate a joint portfolio of more than 40 confectionary brands, each with annual
sales in excess of $100 million, essentially creating the world's biggest confectionary company.

Both Kraft and Cadbury have a lot at stake to make this deal work. Statistically, deals this
complex have a high rate of failure. In fact, research conducted by RHR International found that
70% of acquisitions fail to deliver the expected results. Despite the discouraging data, there is
much the leadership teams at both Kraft and Cadbury can do to put the odds in their favor.

Here is a look at the immediate challenges and what leadership at each company can do to
mitigate them.

• The negotiation process was hostile.

Cadbury declined Kraft's initial offer. Compounding the issue was that the dialogue (which was
hostile at times) between the two companies played out in the news for months prior to inking
the final deal. Fence-mending will need to take place before any real integration can begin.

• They are iconic brands that have long pursued different positioning.

Corporate and national pride behind both companies is strong. For Cadbury, coming to terms
with the fact that it may have to merge some of its identity with Kraft could be especially
difficult. (Let's face it—Cadbury is nearly as important to British culture as the Beatles.)
Although this issue is largely a marketing/positioning question, it will have impact on the
reaction of both organizations to the acquisition.

• Perceived dominance.

Cadbury executives might assume that Kraft will adopt a dominant approach. Kraft will have to
make their intentions with Cadbury clear as soon as possible to avoid unnecessary speculation.

• There is a learning curve.

Kraft purchased Cadbury to break into emerging markets, and it will take Kraft some time to
learn the nuances of working in those markets.

• Tough decisions are inevitable.

Because Kraft borrowed heavily to buy Cadbury, it may be focused on revenue in the short term.
Some difficult decisions could be on the horizon.

Making the Deal Work

Putting the challenges aside, the first 100 days after a deal is announced can determine the
success or failure of the acquisition. In this situation, one of the best strategies to bring the two
teams together is to identify common goals. Experience shows that the more quickly individuals
from both companies get to work together on common projects with common goals, the better
the integration will work.

At the same time, management must make quick, yet considerate, decisions on divisive issues.
There has already been speculation around pending layoffs at both Kraft and Cadbury, which
diminishes productivity at all levels. Management will need time to determine the best blend of
talent, but it is a top priority and must be executed swiftly so that people can move on as soon as
possible.

At first glance, Kraft and Cadbury appear to be very different companies. But the reality is that
they have much in common; after all, they are both consumer-product companies that specialize
in confection and packaged foods. The leadership team can capitalize on this by having talent
from both organizations work jointly on projects. This will encourage employees to focus on
their similarities, rather than their differences.

Finally, employees at Kraft and Cadbury most likely have preconceived notions about the other
based on what they have read in the news or heard through industry chatter. It is essential that the
leadership team takes the time to discuss the differences in culture sooner rather than later, so
that they can focus on similarities. Our experience shows that these differences begin to pale
very quickly if they can be addressed early on.

Challenge to Kraft's Leadership

To be successful, Kraft needs to have an open and honest dialogue with Cadbury. This will give
people a realistic understanding of what is going to happen, allowing them to make informed
decisions about future prospects. Building trust is the only way to prevent the defection of
talented people. Kraft will face an immediate disadvantage if Cadbury's top talent leaves because
no one knows the details of making a company successful better than those who had a role in its
success.

As the acquirer, Kraft also has the responsibility to provide a detailed road map for integration.
This will ensure that everyone understands the process for joining the companies, which will free
up the leadership team to address hidden issues. The plan should provide guidance on the
effectiveness of executives and managers, the performance of work units and processes, and the
management of organizational change.

Finally, Kraft will have to unite the two companies under one vision. Communications programs
that support the new vision must be planned, initiated, and sustained, and employees that support
the vision should be rewarded. Executives and work units must be redeployed where they will be
the most efficient. Departments will have to be restructured and processes redesigned in order to
align with the new company. A system should be put in place for development of team
effectiveness, so that teams are cohesive. Conflict-resolution methods must be developed to
ensure quick and effective solutions, while workforce standards are sharpened and common
business practices established. Adjustments to the culture should be made when necessary.

Challenge to Cadbury's Leadership

Integrating after a merger or acquisition is challenging for any organization, even under the best
of circumstances. But after the deal is done, it's critical for leadership of the acquired company to
publicly embrace the acquisition and show enthusiasm about the future. By focusing on the
benefits of the acquisition, Cadbury executives will be better equipped to communicate the value
that Kraft brings to the brand.

Senior executives at Cadbury will need to take symbolic steps to demonstrate their openness to
the merger. This might be in the form of meetings, handshakes, companywide memos, public
speeches, and even positive quotes about the acquisition in the media.

Ultimately, Cadbury should be proud of its accomplishments over the years. Companies become
acquisition targets because they have a reached a high level of success. Executives can retain that
pride while still keeping other emotions in check. One thing is for certain: There is no room for
egos during the integration process.

While there are many challenges to overcome on both sides of the Kraft-Cadbury deal, strong
leadership can help to smooth the process. Executives from both Kraft and Cadbury must
remember that if the integration is successful, it will be a boon to both the companies, and to
consumers.

Guy Beaudin is a senior partner with RHR International, an organization of management

psychologists and consultants who work closely with senior executives to accelerate individual,
team, and business performance.