ABSTRACTKraft Foods sealed a deal for Cadbury as the famed British chocolate maker accepted a sweetened bid worth some US$19 billion creating a world leader in confections. Ending a bruising months-long hostile takeover battle, Cadbury's board agreed to an improved offer valuing the British group at 11.5 billion pounds (US$18.9 billion), or 840 pence per share, the companies said in a statement. Under the agreement, Cadbury shareholders will also receive 10 pence per share via a special dividend, lifting Kraft's offer to 11.9 billion pounds (US$19.5 billion). The deal would make US-based Kraft, the world's second-biggest food company, one of the biggest global players in chocolate and confections, giving the US group the brands of Dairy Milk and Creme Egg to go along with Kraft's Toblerone, Milka, Suchard and Cote d'Or, among others. Investors welcomed Tuesday's news, sending Cadbury's US-listed shares up 6.14 per cent to US$55.09. Kraft shares fell 0.57 per cent to US$29.41.

Commenting on the Offer, Irene Rosenfeld, Chairman and CEO of Kraft Foods, said:
"We have great respect for Cadbury’s brands, heritage and people. We believe they will thrive as part of Kraft Foods. This recommended offer represents a compelling opportunity for Cadbury Shareholders, providing both immediate value certainty and upside potential in the combined company. For Kraft Foods Shareholders it transforms the portfolio, accelerates long-term growth and delivers highly attractive returns, while maintaining financial discipline."

Commenting on the Offer, Roger Carr, Chairman of Cadbury, said:
"We believe the offer represents good value for Cadbury shareholders and are pleased with the commitment that Kraft Foods has made to our heritage, values and people throughout the world. We will now work with the Kraft Foods' management to ensure the continued success and growth of the business for the benefit of our customers, consumers and employees."

RECOMMENDED FINAL* OFFER by KRAFT FOODS INC. ("KRAFT FOODS") for CADBURY PLC ("CADBURY") SUMMARY Recommended Final Offer terms • The board of Kraft Foods is pleased to announce the detailed terms of a recommended Final Offer for Cadbury and the board of Cadbury unanimously recommends Cadbury Security holders to accept the terms of the Final Offer. • Under the terms of the Final Offer, Cadbury Security holders will be entitled to receive:

 For each Cadbury Share 500 pence in cash and 0.1874 New Kraft Foods Shares  For each Cadbury ADS 2,000 pence in cash and 0.7496 New Kraft Foods Shares Representing, in aggregate, 840 pence per Cadbury Share and GBP 33.60 per Cadbury ADS.

In addition, Cadbury Shareholders will be entitled to receive 10 pence per Cadbury share by way of a Special Dividend following the date on which the Final Offer becomes or is declared unconditional.

• The terms of the Final Offer reflect the strength of Cadbury's business, its brands and the future potential for growth through the combination of Kraft Foods and Cadbury.

An attractive valuation and substantial long-term value creation potential as part of the Combined Group • Kraft Foods believes that the Final Offer represents a compelling opportunity for Cadbury Security holders, providing the ability to receive approximately 60 per cent. Of their consideration in cash and long-term value creation potential through a continued shareholding in the Combined Group. • The Final Offer represents an attractive multiple of 13.0 times Cadbury's underlying 2009 EBITDA. • Kraft Foods believes a combination with Cadbury will provide the potential for meaningful cost savings and revenue synergies from which Cadbury Security holders will benefit.

Combination creates a global leader in the global foods and confectionery sector • Kraft Foods believes a combination represents a strong and complementary strategic fit, creating a global confectionery leader with a portfolio of more than 40 confectionery brands each with annual sales in excess of USD 100 million. • Kraft Foods and Cadbury have a highly complementary geographic footprint, providing the Combined Group with a leading presence in attractive global markets. • The Combined Group will have a leading position in developing markets, including in Brazil, Russia, India, China, and Mexico. • The Combined Group will benefit from important additional scale in the consolidating confectionery segments.

• The Combined Group will have best-in-class infrastructure in both traditional and instant consumption routes to market. Further details of the Final Offer • Kraft Foods also announces that it reserves the right to, and intends to, reduce the number of acceptances required to fulfil the Acceptance Condition from 90 per cent. to 50 per cent. plus one Cadbury Share on or after 26 January 2010. • The Final Offer does not require the approval of Kraft Foods Shareholders. Accordingly, the condition relating to such approval, as set out in the Original Offer Documents, is treated as satisfied for the purposes of the Final Offer. • Full acceptance of the Final Offer will result in the issue of 265 million New Kraft Foods Shares, representing approximately 18 per cent. of the existing issued share capital and 15 per cent. of the enlarged issued share capital of Kraft Foods.

• Kraft Foods announces that all of the Conditions to its recommended Final Offer have been satisfied or waived and, accordingly, the Offer is wholly unconditional. • The Final Offer will remain open until further notice and at least 14 days' notice will be given if Kraft Foods decides to close the Final Offer. Cadbury Securityholders who have not yet accepted the Offer are encouraged to do so without delay. • Commenting on the Offer, Irene Rosenfeld, Chairman and CEO of Kraft Foods said, “The combination of Kraft Foods and Cadbury creates a global powerhouse in snacks, confectionery and quick meals. Together we have impressive global reach and an unrivalled portfolio of iconic brands, with tremendous growth potential. I warmly welcome Cadbury employees into the Kraft Foods family and look forward to meeting many of them in the days and weeks ahead. This combined company has a phenomenal future, and I firmly believe it will deliver outstanding returns to our shareholders.” Level of acceptances As at 1.00 p.m. (London time) on 2 February 2010, Kraft Foods had received valid acceptances of the Offer in respect of a total of 987,684,041 Cadbury Shares (including those represented by Cadbury ADSs), representing approximately 71.73 per cent. of the existing issued share capital of Cadbury. Delisting and re-registration Following receipt of sufficient acceptances (i.e. 75 per cent.), Kraft Foods intends to procure that Cadbury will apply for the cancellation of the listing of Cadbury Shares on the Official List and the trading on the London Stock Exchange for listed securities. Kraft Foods also intends to procure that, as soon as practicable, Cadbury will apply for the delisting of Cadbury ADSs from the NYSE and that Cadbury terminates its ADS program and the Deposit Agreement. A notice period of not less than 20 Business Days prior to delisting from the London Stock Exchange will commence as soon as Kraft Foods has received sufficient acceptances to procure the delisting of the Cadbury Shares. Delisting is likely to reduce significantly the liquidity and marketability of

any Cadbury Shares (including those represented by Cadbury ADSs) in respect of which the Offer has not been accepted. • It is also proposed that, after Cadbury Shares are delisted, Cadbury will be re-registered as a private company. Compulsory acquisition Kraft Foods intends, assuming it becomes so entitled (by receiving 90 per cent. acceptances), to acquire compulsorily any outstanding Cadbury Shares (including any Cadbury Shares represented by Cadbury ADSs) pursuant to the provisions of the 2006 Act. Settlement The consideration to which any Cadbury Securityholder is entitled under the Offer will be settled (i) in the case of complete acceptances received on or before 1 p.m. (London time) on the date of this announcement, on or before 16 February 2010; and (ii) in the case of complete acceptances received after the date of this announcement but while the Offer remains open for acceptance, within 14 days of such receipt, in each case in the manner described in the Final Offer Documents. Acceptance of the Offer Cadbury Securityholders who have not yet accepted, and wish to accept, the Offer should take action to accept the Offer as soon as possible. Details of the procedure for doing so are set out in the Final Offer Documents (including, in the case of certificated Cadbury Shares and Cadbury ADSs, the Final Acceptance Forms) sent to Cadbury Securityholders on 20 January 2010.
About Kraft Foods

The combination of Kraft Foods and Cadbury creates a global powerhouse in snacks, confectionery and quick meals. With annual revenues of approximately $50 billion, the combined company is the world's second largest food company, making delicious products for billions of consumers in more than 160 countries. The combined company's portfolio includes 11 iconic brands with revenues exceeding $1 billion - Oreo, Nabisco and LU biscuits; Milka and Cadbury chocolates; Trident gums; Jacobs and Maxwell House coffees; Philadelphia cream cheeses; Kraft cheeses, dinners and dressings; and Oscar Mayer meats. Another 70+ brands generate annual revenues of more than $100 million. Kraft Foods (; NYSE: KFT) is a member of the Dow Jones Industrial Average, Standard & Poor's 500, Dow Jones Sustainability Index and Ethibel Sustainability Index.

Following are the information regarding this deal.
1Management, employees and locations
. Kraft Foods believes that the combination of Cadbury and Kraft Foods represents a strong, complementary fit and expects that the combination will enhance the Combined Group's growth profile. The combination will augment the world-class capabilities of both Kraft Foods and Cadbury by employing a "best of both" approach, from sales and marketing to distribution and management. In particular, Kraft Foods believes that the global business network of the Combined Group will create opportunities for Cadbury employees and managers. In addition, Kraft Foods has given assurances to Cadbury that, on the Offer becoming or being declared wholly unconditional, the existing contractual employment rights, including pension rights, of all Cadbury Group employees will be fully safeguarded

2. Mix and Match Facility Cadbury Securityholders who accept the Final Offer may make elections under the Mix and Match Facility. Under the Mix and Match Facility, accepting Cadbury Securityholders may elect to vary the proportions in which they receive New Kraft Foods Shares and cash consideration, subject to off-setting elections being made by other Cadbury Securityholders. To the extent that elections cannot be satisfied in full, they will be scaled down on a pro-rata basis.

3. Reduction of Acceptance Condition Kraft Foods also announces that it reserves the right to, and intends to, reduce the number of acceptances required to fulfil the Acceptance Condition from 90 per cent. to 50 per cent. plus one Cadbury Share on or after 26 January 2010. If the Acceptance Condition is satisfied and all other Conditions have been satisfied, fulfilled or, to the extent permitted, waived, the Offer will be declared wholly unconditional at that time and withdrawal rights will terminate (except in limited circumstances).
• Condition regarding approval of Kraft Foods Shareholders The issue of New Kraft Foods Shares pursuant to the Final Offer does not require the approval of Kraft Foods Shareholders. Accordingly, the condition relating to such approvals is treated as satisfied for the purposes of the Final Offer.

4. The creation of a global leader in the food and confectionery industry The board of Kraft Foods believes that a combination of Kraft Foods and Cadbury represents a strong and complementary strategic fit, creating a global confectionery leader, with a portfolio including more than 40 confectionery brands, each with annual sales in

excess of USD 100 million. Globally, the Combined Group would be number one in the chocolate and sugar confectionery segments and a strong number two in the high growth gum segment. Cadbury's leading brands, such as Cadbury, Trident and Halls, are highly complementary to Kraft Foods' portfolio and would benefit from Kraft Foods' global scope, scale and array of proprietary technologies and processes. In addition, the acquisition of Cadbury will significantly enhance the strength of Kraft Foods' presence in the confectionery sector, enabling Kraft Foods to leverage Cadbury's product development capabilities.

5. Substantial synergy benefits The combination of Kraft Foods and Cadbury is expected to provide the potential for meaningful revenue synergies over time from investments in distribution, marketing and product development. In addition, it is expected that pre-tax cost savings of at least USD 675 million annually can be realised by the end of the third year following completion. Total one-off implementation cash costs of approximately USD 1.3 billion are expected to be incurred in the first three years following completion. 6. Financial effects of the transaction
Kraft Foods believes that the Final Offer will deliver the following key benefits:
• Accretion to earnings per share in 2011 of approximately USD 0.05 on a cash basis; and • A mid teens return on investment, well in excess of Kraft Foods’ cost of capital.

Kraft Foods believes that the Final Offer is consistent with its commitment to maintain a financially disciplined approach and is well within the key criteria outlined in Kraft Foods’ announcement of a possible offer for Cadbury on 7 September 2009:
• Accretion to earnings in the second year following completion on a cash basis (which excludes the one-time costs to achieve synergies and expenses related to the transaction and the impact of non-cash items such as the amortization of intangibles after acquisition); • A return on investment in excess of Kraft Foods' cost of capital within an acceptable timeframe; • Retention of Kraft Foods' investment-grade credit rating; and • Maintenance of Kraft Foods' dividend

Following the combination with Cadbury, Kraft Foods expects to revise its long-term growth targets to 5+ per cent. for revenue and 9-11 per cent. for earnings per share, from its previously announced 4+ per cent. and 7-9 per cent. respectively.( In addition, the acquisition is expected to enhance the quality of the Combined Group's earnings, and create a business with strong discretionary cash flow generation and attractive revenue growth prospects across a diversified portfolio of brands and product groups worldwide.

7. Financing the cash consideration

Kraft Foods is providing the cash consideration payable by it under the Final Offer from its own resources, funds available from an amended bridge facility that has been arranged by a syndicate of banks and/or proceeds from alternative financing sources. A summary of the amended bridge facility will be included in the Final Offer Documents. Lazard & Co., Limited, Centerview Partners UK LLP, Citigroup Global Markets Limited and Deutsche Bank AG, London Branch are satisfied that sufficient resources are available to Kraft Foods to satisfy in full the cash consideration payable by it as a result of full acceptance of the Final Offer.
Kraft management branded the proposed acquisition as the company’s strategic move to build a global powerhouse in snacks, confectionery, and quick meals. Specifically, Kraft believes combining KFT&CBY can be justified by the following value propositions: 1. The combined company could target long-term organic revenue growth in excess of 5% and sustainable long-term EPS growth of 9 to 11%, whereas Kraft targets long-term organic revenue growth of 4% and EPS growth of 7 to 9% on a standalone basis. 2. The higher long-term growth rates in revenues and bottom lines will be driven by revenue synergies and $625 million identified annual cost savings. 3. Cadbury is highly complementary to Kraft’s geographical footprint and will increase developing markets’ contribution to Kraft’s net revenue from about 20% to about 25%. Kraft management has been banging the familiar synergy/strategy drum hard regarding the significance of the acquisition, and claims itself a disciplined buyer. While increasing exposure to developing markets does sound appealing and increasing top line growth by 1% on a large revenue base is worthy of applause, we are not sure those promises justify the price tag. Based on the proposed price of 745 pence per ordinary share or approximately $50 per ADR, CBY needs to deliver top line growth of 10% and EBITDA margins of 27% each year from 2010 to 2014 to justify the purchase price. Historically, CBY’s organic top line growth has been in the range of 4-6% and its EBITDA margins have declined from 22% in 2004 (peak) to 15% in 2008 (trough). It doesn’t take a brain surgeon to conclude, it will be very hard for CBY to achieve those lofty operational assumptions in the future to deserve the purchase price. If we boldly assume all the projected $625 million annual savings will come from Cadbury and be realized, CBY’s standalone EBITDA margin will increase by approximately 8%, still falling short of the implied 27% margin, based on its profitability track record from 2006 to 2008 (17%, 16%, and 15% respectively each year). In other words, even if the annual cost savings assumptions are realized, it is likely that Kraft is still overpaying for the projected cash flows CBY can bring to the table. Needless to say, as with many deals spurred by enthusiastic I-Banker cheerleaders, Kraft may overestimate its ability to achieve the operational excellence required to justify its own assumptions of the transaction. Turning to Kraft Foods. On a standalone basis, if Kraft is able to deliver annualized top line growth of 4%, grow EPS at the high end of its targeted 7-9% range, and achieve higher asset efficiency via productivity gains as management has been promising, its shares could be worth as much as $32, rather attractive relative to their current trading levels. It seems logical for us to suggest that Kraft should focus on improving its existing operations to maximize shareholder value, rather than overpaying for Cadbury to achieve non-substantial incremental growth. The market seems to agree with us as well, given since the announcement KFT has under-performed the S&P 500 by nearly 8%. In addition, Kraft will likely use $8 billion new debt to finance about half of the purchase, increasing its leverage to a higher level amid continuous economic uncertainties. While we appreciate KFT management’s confidence in the credit

market and the overall economic environment, we are skeptical of the wisdom in pursuing the Cadbury acquisition at this moment. Needless to say, most companies in corporate America are tirelessly deleveraging. Management has insisted there is no threat to its existing investment-grade credit rating. Sadly most people purchased tech stocks up to the crash, and continued to buy real estate as the bottom fell out. In today’s environment, we turn to the wise Chinese saying, “Hope for the best, but prepare for the worst”. Leveraging up in this environment to purchase pricey assets does not seem very wise.

8. Cadbury Share Schemes
The Final Offer extends to any Cadbury Shares unconditionally allotted or issued before the Final Offer closes (or such earlier time as Kraft Foods may, subject to the rules of the Takeover Code, decide) as a result of the exercise of options or vesting of awards granted under any of the Cadbury Share Schemes. Appropriate proposals will be made in due course to holders of options and awards granted under the Cadbury Share Schemes. The benefit of Cadbury's Special Dividend of 10 pence per share will be extended to participants in the Cadbury Share Schemes. 9. Break fee arrangement Cadbury has agreed to pay an inducement fee of GBP 117.7 million in circumstances where a competing offer is announced and either is recommended by Cadbury or that offer or another third party offer becomes unconditional and the Final Offer lapses or is withdrawn, unless, prior to such announcement, Cadbury withdraws its recommendation for reasons demonstrably unrelated to such competing offer.

10. Overseas shareholders The availability of the Final Offer and of the New Kraft Foods Shares to persons not resident in the UK, the US, Canada, France, Ireland or Spain may be affected by the laws or regulations of relevant jurisdictions. Such persons should inform themselves about and observe any applicable requirements. Further details in relation to overseas shareholders will be set out in the Final Offer Documents. 11. Small Dealing Facility Subject to clarifying certain legal and regulatory considerations and with the agreement of the Panel, Kraft Foods has agreed to consider offering a free dealing facility to Cadbury Shareholders who own not more than 10,000 Cadbury Shares under which the New Kraft Foods Shares to which such Cadbury Shareholders become entitled under the Final Offer may be sold for their benefit at no cost. Details of such facility, if provided, will be communicated to Cadbury Shareholders in due course. 12. General and documentation The Final Offer remains subject to the terms and conditions set out in Appendix I to the Original Offer Document (Appendix A to the Original US Offer Document) save that the Final Offer does not require the approval of Kraft Foods Shareholders and that European and US competition clearances have been obtained. The Final Offer also remains on and subject to the terms set out in the Original Offer Documents as such further terms have been revised in connection with the Final Offer as will be set out in the Final Offer Documents and Final Acceptance Forms. The relevant Final Offer Documents and Final Acceptance Forms will be sent to Cadbury Security holders (other than to certain overseas shareholders) and, for information purposes, to persons with information rights and to participants in the Cadbury Share Schemes, as soon as practicable.

Lesson from Kraft’s Cadbury takeover
 The Keynsham plant near Bristol will close, despite the fact that Kraft promised to keep it open (that was actually a bit weird, as Cadbury itself had announced that Keynsham would be closed at some stage in the future).And the fear, of course, as much in the mind of Peter Mandelson as in the minds of all Cadbury’s workers, is that this is just the first of many cuts that will be brought forward during the next few years.  . Apart from the odd sardonic chuckle as the process unfolded (with that arch-globaliser Mandelson shedding a few crocodile tears at another ‘great British company’ being gobbled up by ‘predators’ like Kraft – or Warren Buffet (who owns about 9% of Kraft) complaining that it’s a really bad deal for Kraft shareholders, however good a deal it might be for Cadbury shareholders), it’s been too bloody miserable.  The optimists would have curmudgeons like me cheer up a little. They point to the pledges made by Kraft to stick by Cadbury’s ethical and Fair-trade commitments. Just before the Cadbury’s Board accepted the bid it announced that Green & Black’s would be moving its entire range to Fair-trade by the end of 2011, which elicited the following emollient words from Kraft:  “We strongly support certification as a way to improve sustainability in cocoa farming, so we welcome this step by Green & Black’s. Cadbury and Green & Black’s have proud histories in ethical sourcing, and if our offer is successful, we look forward to maintaining this heritage.”

 Just so long as you ignore the unmistakable sound of grinding teeth behind the reassuring words,
perhaps that really is something to be optimistic about. But it is still a wretched outcome. And surely a complete failure on the part of Cadbury’s shareholders to tell the difference between ‘a good price’ and ‘lasting value’.  The interesting thing is that employee-owned companies regularly outperform those in the FTSE All-Share Index. Over the last 17 years, employee-owned companies have outperformed FTSE All-Share companies each year by an average of 10%. In the third quarter of 2009, for instance, employee-owned companies’ share prices were up 27.6% compared to FTSE All-Share companies share prices, which were up 21.3% over the quarter. But we are still so stuck in our wretchedly unsustainable ways when it comes to ownership structures within the capitalist economy.


This announcement contains forward-looking statements regarding Kraft Foods' combination with Cadbury. Such statements include, but are not limited to, statements about the benefits of the combination and other such statements that are not historical facts, which are or may be based on Kraft Foods' plans, estimates and projections. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond Kraft Foods' control, that could cause Kraft Foods' actual results to differ materially from those indicated in any such forwardlooking statements. Such factors include, but are not limited to, the risk factors, as they may be amended from time to time, set forth in Kraft Foods' filings with the US Securities and Exchange Commission ("SEC"), including the registration statement on Form S-4, as amended from time to time, filed by Kraft Foods in connection with the offer, Kraft Foods' most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Kraft Foods disclaims and does not undertake any obligation to update or revise any forward-looking statement in this announcement, except as required by applicable law or regulation. Reference-