definitive proxy statement
DESCRIPTION
Kraft foods Definitive proxy statement for the cadbury dealTRANSCRIPT
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8/12/2015 DefinitiveProxyStatement
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DEFM14A1ddefm14a.htmDEFINITIVEPROXYSTATEMENT
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UNITEDSTATESSECURITIESANDEXCHANGECOMMISSION
WASHINGTON,D.C.20549
SCHEDULE14AProxyStatementPursuanttoSection14(a)oftheSecuritiesExchangeActof1934
FiledbytheRegistrant
FiledbyaPartyotherthantheRegistrant
Checktheappropriatebox:
PreliminaryProxyStatement Confidential,forUseoftheCommissionOnly(aspermittedbyRule14a6(e)(2))DefinitiveProxyStatement
DefinitiveAdditionalMaterials SolicitingMaterialUnderRule14a12
KRAFTFOODSINC.(NameofRegistrantasSpecifiedinitsCharter)
(NameofPerson(s)FilingProxyStatement,ifOtherthantheRegistrant)
PaymentofFilingFee(Checktheappropriatebox):
Nofeerequired.
FeecomputedontablebelowperExchangeActRules14a6(i)(1)and011.
1. Titleofeachclassofsecuritiestowhichtransactionapplies:
2. Aggregatenumberofsecuritiestowhichtransactionapplies:
3. PerunitpriceorotherunderlyingvalueoftransactioncomputedpursuanttoExchangeActRule011(Setforththeamountonwhichthefilingfeeiscalculatedandstatehowitwasdetermined):
4. Proposedmaximumaggregatevalueoftransaction:
5. Totalfeepaid:
Feepaidpreviouslywithpreliminarymaterials.
CheckboxifanypartofthefeeisoffsetasprovidedbyExchangeActRule011(a)(2)andidentifythefilingforwhichtheoffsettingfeewaspaidpreviously.Identifythepreviousfilingbyregistrationstatementnumber,ortheFormorScheduleandthedateofitsfiling.
1. Amountpreviouslypaid:
2. Form,ScheduleorRegistrationStatementNo.:
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3. Filingparty:
4. Datefiled:
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IRENEB.ROSENFELDCHAIRMANOFTHEBOARDANDCHIEFEXECUTIVEOFFICER
THREELAKESDRIVENORTHFIELD,ILLINOIS60093
December18,2009
DearFellowShareholder:
YouarecordiallyinvitedtoattendaSpecialMeetingofShareholdersofKraftFoodsInc.WewillholdtheSpecialMeetingat9:00a.m.CSTonMonday,February1,2010,attheHiltonChicago/NorthbrookHotelinNorthbrook,Illinois.RegistrationattheHiltonChicago/NorthbrookHotelwillopenat8:00a.m.CST.
AttheSpecialMeeting,youwillbeaskedtovoteonaproposaltoapproveKraftFoodsissuingupto370millionsharesofourClassAcommonstockinconnectionwithourproposedacquisitionofCadburyplc.WemayusethesesharestoacquirealloftheoutstandingCadburysharecapitalfromCadburyshareholders,tofinancetheCadburyacquisitionorforanyotherpurposesrelatedtotheproposedacquisition.YouwillalsobeaskedtovoteonaproposaltoapproveanyadjournmentoftheSpecialMeeting,including,ifnecessary,tosolicitadditionalproxiesinfavoroftheshareissuanceproposaliftherearenotsufficientvotesforthatproposal.
OnDecember4,2009,wemadeanoffertoacquirealloftheoutstandingCadburyordinaryshares,includingthoserepresentedbyAmericanDepositaryShares(ADSs).Inthistransaction,wewillissueupto370millionsharesofourcommonstockandpayuptoapproximately4.3billionincashintheaggregateinexchangefortheCadburyordinaryshares,includingthoserepresentedbyCadburyADSs.
Inapprovingthenewsharesissuance,youareapprovinguseofthesharesinconnectionwiththeproposedCadburyacquisition,regardlessoftheformoforproceduresfortheacquisition,andanyrelatedfinancingtransaction.
TheBoardhasunanimouslydeterminedthatissuingsharesofourcommonstockinconnectionwiththeproposedacquisitionofCadbury,includinganyrelatedfinancingtransaction,isinthebestinterestofKraftFoodsanditsshareholders.TheBoardunanimouslyrecommendsthatyouvotefortheshareissuanceproposalandtheadjournmentproposal.
OnlyshareholdersofrecordatthecloseofbusinessonDecember14,2009areentitledtovoteattheSpecialMeetingoranyadjournmentsorpostponementsoftheSpecialMeeting.
YoumayvoteyoursharesviatheInternetorbycallingatollfreenumber.Ifyoureceivedapapercopyoftheproxycardorvotinginstructionformbymail,youmaysign,dateandmailyourproperlyexecutedproxycardorvotinginstructionform.OryoumayvoteinpersonattheSpecialMeeting.WeincludeinstructionsabouteachoptionintheattachedProxyStatementandontheenclosedproxycardorvotinginstructionform.Yourvoteisimportanttous.WhetherornotyouplantoattendtheSpecialMeeting,Iencourageyoutovotepromptly.
PleaseregisterinadvanceifyouwouldliketoattendtheSpecialMeeting.ThepreregistrationdirectionsareprovidedintheattachedProxyStatement.
OnbehalfoftheBoard,thankyouforyourcontinuedinterestandsupport.
Sincerely,
IreneB.RosenfeldChairmanoftheBoardandChiefExecutiveOfficer
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IMPORTANTNOTICEREGARDINGTHEAVAILABILITYOFPROXYMATERIALSFORTHESPECIALMEETINGOFSHAREHOLDERS
KraftFoodsInc.sSpecialMeetingProxyStatementandFormofProxyareavailableatwww.kraftfoodscompany.com
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KRAFTFOODSINC.ThreeLakesDrive
Northfield,Illinois60093
NOTICEOFSPECIALMEETINGOFSHAREHOLDERS
OFKRAFTFOODSINC.
TIMEANDDATE: 9:00a.m.CSTonMonday,February1,2010.
PLACE:
HiltonChicago/NorthbrookHotel2855N.MilwaukeeAve.Northbrook,IL60062
ITEMSOFBUSINESS:
(1)Tovoteonaproposaltoapproveissuingupto370millionsharesofKraftFoodsInc.ClassAcommonstockinconnectionwithourproposedacquisitionofCadburyplc,includinganyissuanceofsharesofKraftFoodsInc.ClassAcommonstocktofinancetheproposedacquisition.
(2)TovoteonaproposaltoapproveanyadjournmentoftheSpecial
Meeting,including,ifnecessary,tosolicitadditionalproxiesinfavorofItem1iftherearenotsufficientvotesforsuchproposal.
(3)TotransactotherbusinessproperlypresentedattheSpecial
Meeting.
BOARDRECOMMENDATION:
TheBoardhasunanimouslydeterminedthatissuingsharesofourcommonstockinconnectionwiththeproposedacquisitionofCadbury,includinganyrelatedfinancingtransaction,isinthebestinterestofKraftFoodsanditsshareholders.TheBoardrecommendsthatshareholdersvoteforItems1and2.
WHOMAYVOTE: ShareholdersofrecordatthecloseofbusinessonDecember14,2009.
DATEOFDISTRIBUTION: WearemailingtheProxyStatementonornearDecember21,2009.
MATERIALSAVAILABLEONOURWEBSITE:
ThisNoticeofSpecialMeetingandtheProxyStatementareavailableatwww.kraftfoodscompany.com.Informationincludedonourwebsite,otherthanthesematerials,isnotpartoftheproxysolicitingmaterials.
CarolJ.WardVicePresidentandCorporateSecretary
December18,2009
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TABLEOFCONTENTS PageQUESTIONSANDANSWERSABOUTTHESPECIALMEETINGANDVOTING 1
SUMMARY 8TheCompanies 8TheOffer 8PossibleEquityFinancing 9RecommendationofourBoard 9ConditionsoftheOffer 10InterestsofKraftFoodsandOurExecutiveOfficersandDirectorsintheShareIssuance 10AccountingTreatment 10RegulatoryApprovals 10RiskFactors 10
NOTEONCADBURYINFORMATION 11
CURRENCIES 12
EXCHANGERATEINFORMATION 13
FORWARDLOOKINGSTATEMENTS 14
SELECTEDHISTORICALCONSOLIDATEDFINANCIALDATAOFKRAFTFOODS 15
SELECTEDHISTORICALCONSOLIDATEDFINANCIALDATAOFCADBURY 17
SELECTEDUNAUDITEDPROFORMACOMBINEDFINANCIALDATA 19
HISTORICALANDPROFORMAPERSHAREDATA 21
COMPARATIVEMARKETPRICEANDDIVIDENDINFORMATION 23
RISKFACTORS 25RiskFactorsRelatingtotheProposedCadburyAcquisitionandtheOffer 25RiskFactorsRelatingtoOurBusinessandtheBusinessoftheCombinedCompany 28RiskFactorsRelatingtoCadburysBusiness 34
THESPECIALMEETING 35Time,Date,PlaceandPurpose 35RecordDateandSharesEntitledtoVote 35VotingProcedures 35Quorum 36VoteRequired 36ProxySolicitation 36ChangeofVoteandRevocationofProxies 37KraftFoodsAuditors 37
ITEM1ISSUANCEOFSHARESOFOURCOMMONSTOCKINCONNECTIONWITHOURPROPOSEDACQUISITIONOFCADBURY 38
General 38EffectofShareholderApproval 39RegistrationStatement 39PreemptiveRights 40Appraisal/DissentersRights 40RecommendationoftheBoard 40ReasonsfortheCadburyAcquisitionandShareIssuance 40TimingoftheCadburyAcquisition 41
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TABLEOFCONTENTS(Continued)
PageITEM2ADJOURNMENTOFTHESPECIALMEETING 42
THECOMPANIES 43KraftFoods 43Cadbury 44
BACKGROUNDOFTHEPROPOSEDCADBURYACQUISITION 45
THEOFFER 52TermsoftheOffer 52ConditionsoftheOffer 52AccountingTreatment 53OwnershipofKraftFoodsAfterCompletionoftheCadburyAcquisition 54FederalIncomeTaxConsequencesoftheShareIssuance 54RegulatoryApprovals 55FinancingoftheCadburyAcquisition 56
CERTAINRELATIONSHIPSWITHCADBURYANDINTERESTSOFOURDIRECTORSANDEXECUTIVEOFFICERSINTHESHAREISSUANCE 57
OWNERSHIPOFEQUITYSECURITIES 58
UNAUDITEDU.S.GAAPPROFORMAFINANCIALINFORMATION 60
SUMMARYOFSIGNIFICANTDIFFERENCESBETWEENIFRSANDU.S.GAAP 72
WHEREYOUCANFINDMOREINFORMATION 75
INCORPORATIONBYREFERENCE 76
SHAREHOLDERPROPOSALSFORTHE2010ANNUALMEETINGOFSHAREHOLDERS 78
OTHERMATTERS 78
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KRAFTFOODSINC.ThreeLakesDrive
Northfield,Illinois60093
PROXYSTATEMENT
FORSPECIALMEETINGOFSHAREHOLDERS
TOBEHELDONFEBRUARY1,2010
QUESTIONSANDANSWERSABOUT
THESPECIALMEETINGANDVOTING
Thefollowingaresomeofthequestions,andanswerstothosequestions,thatyou,asashareholderofKraftFoodsInc.(KraftFoods),mayhaveregardingKraftFoodsproposedacquisitionofCadburyplc(Cadbury)andthemattersbeingconsideredatthespecialmeetingofshareholderstowhichthisProxyStatementrelates.Theinformationinthissectiondoesnotprovidealloftheinformationthatmaybeimportanttoyouwithrespecttothemattersbeingconsideredatthemeeting.Therefore,youshouldreadthisProxyStatementcarefully,aswellasthefullcontentsoftheotherdocumentstowhichthisProxyStatementrefersorincorporatesbyreference.Thesedocumentscontaininformationthatmaybeimportanttoyouindetermininghowyouwillvoteonthematterstobeconsideredatthespecialmeeting.
ReferencesinthisProxyStatementtowe,usandourrefertoKraftFoodsand,whereapplicable,itssubsidiaries.1. WhenandwhereistheSpecialMeeting?
KraftFoodswillholdaSpecialMeetingofShareholdersonMonday,February1,2010,at9:00a.m.CSTattheHiltonChicago/NorthbrookHotelinNorthbrook,Illinois.RegistrationattheHiltonChicago/NorthbrookHotelwillopenat8:00a.m.CST.DirectionstotheHiltonChicago/NorthbrookHotelareincludedattheendofthisProxyStatement.2. WhyamIreceivingtheseproxymaterials?
WeareprovidingyouwiththeseproxymaterialsinconnectionwithourBoardssolicitationofproxiestobevotedatourSpecialMeetingofShareholderstobeheldonMonday,February1,2010oranyadjournmentsorpostponementsofthemeeting(theSpecialMeeting).ThesematerialsdescribethevotingproceduresandthematterstobevotedonattheSpecialMeeting.3. WhatamIbeingaskedtovoteon?
YouarebeingaskedtoconsiderandvoteonaproposaltoapproveKraftFoodsissuingupto370millionsharesofourClassAcommonstock,whichwerefertoasourcommonstock,inconnectionwithourproposedacquisitionofCadbury,whichwerefertoastheCadburyacquisition,includinganyissuanceofsharesofourcommonstocktofinancetheCadburyacquisition.
YouarealsobeingaskedtoconsiderandvoteonaproposaltoapproveanyadjournmentoftheSpecialMeeting,including,ifnecessary,tosolicitadditionalproxiesinfavoroftheshareissuanceproposaliftherearenotsufficientvotesforthatproposal.
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4. Whyisshareholderapprovaloftheshareissuancerequired?
OnDecember4,2009,wemadeanoffertoacquireeachoutstandingCadburyordinaryshare,includingeachsharerepresentedbyCadburyAmericanDepositaryShares(ADSs),inexchangefor0.2589sharesofourcommonstockand300penceincash.AsoneCadburyADSrepresentsfourCadburyordinaryshares,holdersofCadburyADSswillbeentitledtoreceive1.0356sharesofourcommonstockand1,200penceincashforeachCadburyADStheytenderintheoffer.
BaseduponpubliclyavailableinformationasofDecember15,2009,ifweacquire,onthefinancialtermsdescribedinthisProxyStatement,100%oftheoutstandingCadburyordinaryshares,includingthoserepresentedbyCadburyADSs,andassumingalloutstandingoptionstoacquireCadburyordinarysharesandothershareawards(asatDecember9,2009)areexercised,weexpecttoissueupto370millionsharesofourcommonstock.Becausethisnumberwillbegreaterthan20%ofthetotalnumberofsharesofourcommonstockoutstandingpriortotheissuance,wearerequiredtoobtainshareholderapprovalforissuingthesesharesunderthelistingrequirementsoftheNewYorkStockExchange(NYSE).
ItisalsopossiblethatwemaydecidetoissuecommonstockorsecuritiesconvertibleintocommonstockinapublicorprivateofferingtofinancetheCadburyacquisition.UnderNYSErules,suchissuancemightbeconsideredpartoftheCadburyacquisitionforthepurposeofthe20%thresholddescribedabove.
YourapprovaloftheshareissuanceproposalwillconstituteapprovaloftheshareissuanceinconnectionwiththeCadburyacquisition,includinganyrelatedfinancingtransaction,regardlessoftheformof,proceduresfororfinaltermsoftheacquisitionorfinancing.ShareholdersarenotbeingaskedtovoteontheCadburyacquisitionandnovoteofKraftFoodsshareholdersisrequiredonthatmatter.
Ifwedecidetomakeanyrelatedpublicorprivateofferingofourcommonstock,orifanytermoftheCadburyacquisitiondescribedinthisProxyStatementchanges,ineachcaseinamannerthatwebelieveismaterialtoourshareholders,wewillsupplementthisProxyStatementtoinformyouofthechangeand,iflegallyrequired,resolicitproxiesfromourshareholders.5. HowwillKraftFoodseffecttheproposedacquisitionofCadbury?
WehavemadeanoffertoacquirealloftheoutstandingCadburyordinaryshares,includingthoserepresentedbyCadburyADSs,directlyfromtheCadburyshareholders.TheCadburyBoardhasrecommendedthatCadburyshareholdersrejectthisoffer.However,iftheCadburyBoardlaterdecidestorecommendouroffer,itispossiblethatwewillagreewithCadburytoacquirealloftheoutstandingsharecapitalofCadburythroughaU.K.schemeofarrangement,whichisacourtapprovedacquisitionvotedonbyCadburyshareholders.Theshareissuanceproposalgivesustheflexibilitytomakethischangewithoutanothershareholdervote.6. Whatwillbetheeffectoftheshareissuance?
Weestimatethat,ifweissuedall370millionofthesharesweareseekingapprovaltoissue,existingKraftFoodsshareholderswouldownapproximately80%ofthesharesofourcommonstockoutstandingimmediatelyaftertheCadburyacquisition,includinganyrelatedequityfinancing,iscompleted.Foradiscussionoftheassumptionsonwhichwebasedthisestimate,pleaseseethesectionofthisProxyStatemententitledTheOfferOwnershipofKraftFoodsAfterCompletionoftheCadburyAcquisition.7. WhenisthisProxyStatementbeingmailed?
WearemailingthisProxyStatementandtheproxycardtoourshareholdersonornearDecember21,2009.Wealsoprovidethesematerialsonourwebsiteatwww.kraftfoodscompany.com.
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8. WhoisentitledtovoteattheSpecialMeeting?
OurBoardestablishedDecember14,2009astherecorddate(theRecordDate)fortheSpecialMeeting.OnlyshareholdersofrecordowningourcommonstockatthecloseofbusinessontheRecordDateareentitledto(a)receivenoticeoftheSpecialMeeting,(b)attendtheSpecialMeetingand(c)voteonallmattersthatproperlycomebeforetheSpecialMeeting.
AtthecloseofbusinessontheRecordDate,1,477,239,577sharesofourcommonstockwereoutstandingandentitledtovote.EachshareisentitledtoonevoteoneachmattertobevoteduponattheSpecialMeeting.9. Whatisthequorumrequirement?
AquorumofshareholdersisnecessarytovalidlyholdtheSpecialMeeting.AquorumwillbepresentifamajorityoftheoutstandingsharesofourcommonstockontheRecordDatearerepresentedattheSpecialMeeting,eitherinpersonorbyproxy.Yourshareswillbecountedforpurposesofdeterminingaquorumifyouvote: ViatheInternet Bytelephone Bysubmittingaproperlyexecutedproxycardorvotinginstructionformbymailor InpersonattheSpecialMeeting.
AbstentionswillbecountedfordeterminingwhetheraquorumispresentfortheSpecialMeeting.10. Whatvoteisneededtoapprovetheshareissuanceproposal?
UnderNYSErules,theapprovaloftheshareissuanceproposalrequiresanaffirmativevoteofthemajorityofthevotescastontheproposal,providedthatthetotalvotescastontheproposalrepresentover50%ofthetotaloutstandingsharesofourcommonstock(theOutstandingVotes).VotesFORandAGAINSTandabstentionscountasvotescast(theNYSEVotesCast).TheNYSEVotesCastmustbegreaterthan50%ofthetotalOutstandingVotes.BecausethenumberofvotesFORtheproposalmustbegreaterthan50%oftheNYSEVotesCast,abstentionshavethesameeffectasavoteAGAINSTtheproposal.
ApprovaloftheadjournmentproposalrequiresthatthenumberofvotescastFORexceedthenumberofvotescastAGAINST,whetherornotaquorumispresent.AbstentionsarenotconsideredasvotingFORorAGAINSTtheadjournmentproposalandwillhavenoeffectontheoutcomeoftheadjournmentproposal.11. Whathappensiftheshareissuanceproposalisnotapproved?
Iftheshareissuanceproposalisnotapproved,wewillnotbeabletoissueintheCadburyacquisitionanumberofsharesofourcommonstockthatisequalto20%ormoreofthetotalnumberofsharesofourcommonstockoutstandingpriortotheissuance.12. WhatothermattersmayariseattheSpecialMeeting?
OtherthanItems1and2describedinthisProxyStatement,wedonotexpectanyothermatterstobepresentedforavoteattheSpecialMeeting.IfanyothermatterisproperlybroughtbeforetheSpecialMeeting,yourproxygivesauthoritytotheproxiesdescribedthereintovoteonsuchmattersintheirdiscretion.
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13. Whatisthedifferencebetweenholdingsharesasaregisteredshareholderandholdingsharesinstreetname?
Ifyoursharesareowneddirectlyinyournamewithourtransferagent,WellsFargoBank,N.A.,youareconsideredaregisteredshareholderofthoseshares.
Ifyoursharesareheldinabrokerageaccountorbyabankorothernominee,youholdthosesharesinstreetname.14. HowdoIvotemyshares?
Ifyouarearegisteredshareholder,youmayvote:
ViatheInternetatwww.eproxy.com/kft.TheInternetvotingsystemwillbeavailable24hoursadayuntil
11:59p.m.CSTonSunday,January31,2010
Bytelephone,ifyouarelocatedwithintheU.S.orCanada.Call18005601965(tollfree)fromatouchtone
telephone.Thetelephonevotingsystemwillbeavailable24hoursadayuntil11:59p.m.CSTonSunday,January31,2010
Byreturningaproperlyexecutedproxycard.Yourproxycardmustbereceivedbeforethepollscloseatthe
SpecialMeetingonMonday,February1,2010or
InpersonattheSpecialMeeting.PleasepreregistertoattendtheSpecialMeetingbyfollowingthepre
registrationdirectionsdescribedbelow.
Ifyouholdyoursharesinstreetname,youmayvote:
ViatheInternetatwww.proxyvote.com(a12digitcontrolnumberisrequired),bytelephoneorbyreturninga
properlyexecutedvotinginstructionformbymail,dependinguponthemethod(s)yourbroker,bankorothernomineemakesavailableor
InpersonattheSpecialMeeting.Todoso,youmustrequestalegalproxyfromyourbrokerorbankand
presentitattheSpecialMeeting.PleasepreregistertoattendtheSpecialMeetingbyfollowingthepreregistrationdirectionsdescribedinQuestion26.
15. Iamacurrent/formerKraftFoodsemployeeandhaveinvestmentsintheKraftFoodsStockFund(s)ofthe
KraftFoodsInc.Thrift/TIP401(k)Plan(s)and/ortheKraftFoodsCanadaOptionalPensionPlan(s)/EmployeeSavingsPlan.CanIvote?Ifso,howdoIvote?
Yes,youareentitledtovote.Forvotingpurposes,yourproxycardincludesallsharesallocatedtoyourKraftFoodsStockFundaccount(s),sharesyoumayholdatourtransferagentasaregisteredshareholder,andanysharesofrestrictedstockyoumayhold.Whenyousubmityourproxy,youaredirectingtheplan(s)trustee(s)howtovotethesharesallocatedtoyourKraftFoodsStockFundaccount(s)inadditiontodirectingthevotingofallothersharesincludedonyourproxycard.
Inordertodirecttheplan(s)trustee(s)howtovotethesharesheldinyourKraftFoodsStockFundaccount(s),youmustvotethesharesby11:59p.m.CSTonWednesday,January27,2010.Ifyourvotinginstructionsarenotreceivedbythattime,thetrustee(s)willvotethesharesallocatedtoyouraccount(s)inthesameproportionastherespectiveplansharesforwhichvotinginstructionshavebeenreceived,unlesscontrarytotheEmployeeRetirementIncomeSecurityActof1974(ERISA).Pleasefollowtheinstructionsforregisteredshareholdersdescribedabovetocastyourvote.AlthoughyoumayattendtheSpecialMeeting,youmaynotvotesharesheldinyourKraftFoodsStockFundaccount(s)atthemeeting.
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16. Iamacurrent/formerKraftFoodsemployeeandholdrestrictedstock.CanIvotemyrestrictedstockholding?Ifso,howdoIvotethoseshares?
Yes.Ifyouholdsharesofrestrictedstock,youshouldfollowtheinstructionsforregisteredshareholdersdescribedinQuestion14tovoteyourshares.Ifyoudonotvoteyourshares,theywillnotbevoted,sopleasevoteyourshares.Forvotingpurposes,yourproxycardincludesyoursharesofrestrictedstock,sharesyoumayholdinaKraftFoodsStockFundaccount(s),andanysharesyoumayholdatourtransferagentasaregisteredshareholder.17. HowdoIvoteifIparticipateinKraftFoodsDirectPurchasePlan?
IfyouholdsharesintheDirectPurchasePlan,youshouldfollowtheinstructionsforregisteredshareholdersdescribedinQuestion14tovoteyourshares.Whenyouvotethoseshares,youwillbevotingallthesharesyouholdatourtransferagentasaregisteredshareholder.Ifyoudonotvoteyourshares,theywillnotbevoted,sopleasevoteyourshares.18. MayIchangemyvote?
Yes.IfyouarearegisteredshareholderandwouldliketochangeyourvoteaftersubmittingyourproxybutpriortotheSpecialMeeting,youmaydosoby(a)signingandsubmittinganotherproxywithalaterdate,(b)votingagainbytelephoneortheInternetor(c)votinginpersonattheSpecialMeeting.Alternatively,ifyouwouldliketorevokeyourproxy,youmaysubmitawrittenrevocationofyourproxytoourCorporateSecretaryatKraftFoodsInc.,ThreeLakesDrive,Northfield,Illinois60093.
Ifyoursharesareheldinstreetname,pleasecontactyourbank,brokerorothernomineeforspecificinstructionsonhowtochangeorrevokeyourvote.PleaserefertoQuestion14foradditionaldetailsaboutvotingyoursharesheldinstreetname.19. Howaremysharesvotedbytheproxies?
Thepersonsnamedasproxiesontheproxycardmustvoteyoursharesasyouhaveinstructed.IfyoudonotgiveaspecificinstructiononanyproposalscheduledforvoteattheSpecialMeetingbutyouhaveauthorizedtheproxiesgenerallytovote,theywillvoteforeachproposalinaccordancewiththeBoardsrecommendationoneachmatter.Yourauthorizationwouldexist,forexample,ifyoumerelysign,dateandreturnyourproxycard.20. WillmysharesbevotedifIdonotprovidemyproxy?
Ifyouarearegisteredshareholderorifyouholdrestrictedstock,yourshareswillnotbevotedunlessyouvoteasinstructedinQuestion14,sopleasevoteyourshares.
Ifyouholdyoursharesinstreetname,underNYSErules,yourbrokeragefirmmaynotvoteonyourbehalfonnonroutinemattersifyoudonotfurnishvotinginstructions.FortheSpecialMeeting,theapprovaloftheshareissuanceproposalandtheadjournmentproposalareconsiderednonroutinematters.Asaresult,ifyouholdsharesofourcommonstockinstreetnameanddonotprovidevotinginstructionstoyourbroker,yourshareswillnotbevotedontheseproposals,sopleasevoteyourshares.
Inaddition,ifyouareacurrentorformeremployeeandhadinvestmentsintheKraftFoodsStockFund(s)oftheKraftFoodsInc.Thrift/TIP401(k)Plan(s)and/ortheKraftFoodsCanadaOptionalPensionPlan(s)/EmployeeSavingsPlanontheRecordDate,youcandirecttheplan(s)trustee(s)howtovotethesharesallocatedtoyouraccount(s).Ifyourvotinginstructionsarenotreceivedby11:59p.m.CSTonWednesday,January27,2010,thetrustee(s)willvotethesharesallocatedtoyouraccount(s)inthesameproportionastherespectiveplansharesforwhichvotinginstructionshavebeenreceived.PleaserefertoQuestion15foradditionaldetailsaboutvotingsharesheldintheKraftFoodsStockFund(s).
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21. IsitsafetovoteviatheInternetortelephone?
Yes.TheInternetandtelephonevotingproceduresweredesignedtoauthenticateshareholdersidentitiesandtoconfirmthattheirinstructionshavebeenproperlyrecorded.22. WhowillbearthecostofsolicitingvotesfortheSpecialMeeting?
Webearthecostofsolicitingyourvote.Inadditiontomailingtheseproxymaterials,ourdirectors,officersoremployeesmaysolicitproxiesorvotesinperson,bytelephoneorbyelectroniccommunication.Theywillnotreceiveanyadditionalcompensationforthesesolicitationactivities.
Wewillenlistthehelpofbanksandbrokeragefirmsinsolicitingproxiesfromtheircustomersandreimbursethebanksandbrokeragefirmsforrelatedoutofpocketexpenses.
WeretainedGeorgesonInc.toaidinsolicitingvotesfortheSpecialMeetingforatotalfeeof$75,000plusreasonableexpenses.23. Whatishouseholding?
Unlessyouadvisedusotherwise,ifyouholdyoursharesinstreetnameandyouandotherresidentsatyourmailingaddresssharethesamelastnameandownsharesofourcommonstockinanaccountatthesamebrokeragefirmorbank,wedeliveredasinglesetofproxymaterialstoyouraddress.Thismethodofdeliveryisknownashouseholding.Householdingreducesthenumberofmailingsyoureceive,aswellasourprintingandpostagecosts.Shareholderswhoparticipateinhouseholdingwillcontinuetoreceiveseparatevotinginstructionforms.Ifyouwouldliketooptoutofhouseholding,pleasecontactyourbrokerorbank.
Ifyouarearegisteredshareholder,wesentyouandeachregisteredshareholderatyouraddressseparatesetsofproxymaterials.24. Aremyvotesconfidential?
Yes.Yourvoteswillnotbedisclosedtoourdirectors,officersoremployees,except(a)asnecessarytomeetapplicablelegalrequirementsandtoassertordefendclaimsfororagainstus,(b)inthecaseofacontestedproxysolicitation,(c)ifyouprovideacommentwithyourproxyorotherwisecommunicateyourvotetousor(d)asnecessarytoallowtheindependentinspectorofelectiontocertifytheresults.25. Whocountsthevotes?
WellsFargoBank,N.A.willreceiveandtabulatetheproxies.IVSAssociates,Inc.willactastheindependentinspectorofelectionandwillcertifytheresults.26. WhatdoIneedtodoifIwouldliketoattendtheSpecialMeeting?
IfyouwouldliketoattendtheSpecialMeeting,pleasepreregisterby11:59p.m.CSTonJanuary29,2010.Duetospacelimitations,youmaybringonlyoneguest.Ifyouwishtobringaguest,youmustindicatethatwhenyoupreregister.Youandyourguest,ifany,mustpresentvalidgovernmentissuedphotographicidentification,suchasadriverslicense,tobeadmittedintotheSpecialMeeting.
Ifyouarearegisteredshareholder,pleaseindicatethatyouintendtoattendtheSpecialMeetingby: Checkingtheappropriatebox(es)ontheInternetvotingsite Followingthepromptsonthetelephonevotingsiteor
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Checkingtheappropriatebox(es)onyourproxycard.
Ifyouholdyoursharesinstreetname,pleasenotifyusinwritingthatyouwillattendandwhetheryouintendtobringaguest.Inthiswrittennotification,pleaseincludeaproofofownershipofourcommonstock(suchasaletterfromyourbankorbroker,aphotocopyofyourcurrentaccountstatementoracopyofyourvotinginstructionform)pleasealsoprovideawayforustoreachyouifthereisaproblemwithyournotification.Sendyournotificationasfollows:
Bymail: Byfax: Byemail:
KraftFoodsInc.c/oGeorgesonInc.Attention:ChristopherCinek199WaterStreet,26thFloorNewYork,NY10038
(877)2600406(tollfreewithintheU.S.)(212)4409009(fromoutsidetheU.S.)Attention:ChristopherCinek
Foryourcomfort,securityandsafety,wewillnotallowanylargebags,briefcases,packagesorbackpacksintotheSpecialMeetingsite.Allbagswillbesubjecttosearch.WealsowillnotallowelectronicdevicesintotheSpecialMeeting.Theseinclude,butarenotlimitedto,cellularanddigitalphones,cameras,audioandvideorecorders,laptopsandpagers.Wewelcomeassistanceanimalsforthedisabled,butdonotallowpets.27. WillIhavedissentersrightsifIdonotsupporttheissuanceofsharesinconnectionwiththeproposed
Cadburyacquisition?
No.KraftFoodsshareholderswillnotbeentitledtoappraisalorsimilardissentersrightsinconnectionwiththeshareissuanceproposalortheCadburyacquisition.28. WherecanIfindmoreinformationonKraftFoodsandCadbury?
YoucanfindmoreinformationaboutKraftFoodsandCadburyfromvarioussourcesdescribedunderWhereYouCanFindMoreInformationonpage75ofthisProxyStatement.29. WhocanItalktoifIhavequestionsabouttheSpecialMeetingortheproposalstobevotedon?
YoucancallGeorgesonInc.tollfreeat18005091312,MondaythroughFridaybetweenthehoursof8:00a.m.and10:00p.m.CSTwithanyquestions.
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SUMMARY
BelowisasummaryofthetermsofouroffertoacquirealloutstandingCadburyordinaryshares,includingthoserepresentedbyCadburyADSs.ThissummaryhighlightsselectedinformationfromthisProxyStatement,andmaynotcontainalloftheinformationthatisimportanttoyou.TobetterunderstandtheCadburyacquisitionortheofferdescribedbelow,youshouldreadthisentireProxyStatementcarefully,aswellasthoseadditionaldocumentstowhichwereferyou.YoumayobtaintheinformationincorporatedbyreferenceintothisProxyStatementbyfollowingtheinstructionssetforthinIncorporationbyReferenceonpage76ofthisProxyStatement.
TheCompanies(Seepage43)
KraftFoods
KraftFoodsistheworldssecondlargestfoodcompany,withrevenuesof$41.9billionandearningsfromcontinuingoperationsbeforeincometaxesof$2.6billionin2008.KraftFoodshasapproximately100,000employeesworldwideandmanufacturesandmarketspackagedfoodproducts,includingsnacks,beverages,cheese,convenientmealsandvariouspackagedgroceryproducts.KraftFoodssellsitsproductstoconsumersinapproximately150countries.AtDecember31,2008,KraftFoodshadoperationsinmorethan70countriesandmadeitsproductsat168manufacturingandprocessingfacilitiesworldwide.AtSeptember30,2009,KraftFoodshadnetassetsof$25.2billionandgrossassetsof$66.7billion.KraftFoodsisamemberoftheDowJonesIndustrialAverage,theStandard&Poors500,theDowJonesSustainabilityIndexandtheEthibelSustainabilityIndex.
KraftFoodsisaVirginiacorporationwithprincipalexecutiveofficesatThreeLakesDrive,Northfield,IL60093.Ourtelephonenumberis(847)6462000andourInternetaddressiswww.kraftfoodscompany.com.
Cadbury
Cadburyisaninternationalconfectionerybusinessthatgenerated5.4billionintotalrevenuefromitsglobaloperationsin2008.AtDecember31,2008,Cadburyoperatedinover60countriesandhadover45,000employees.Cadburysprincipalproductsegmentsare:chocolate,whichcontributed46%ofCadburysrevenuein2008gum,whichcontributed33%ofCadburysrevenuein2008andcandy,whichcontributed21%ofCadburysrevenuein2008(ineachcase,excludingtherevenuesofReadingScientificServicesLimited).
CadburyisregisteredunderthelawsofEnglandandWalesasapubliclimitedcompanywithitsregisteredoffice(principalexecutiveoffice)atCadburyHouse,SandersonRoad,Uxbridge,England,UB81DH.Itstelephonenumberis+441895615000anditsInternetaddressiswww.cadbury.com.InformationcontainedonCadburyswebsitedoesnotconstituteapartofthisProxyStatement.
TheOffer(Seepage52)
OnDecember4,2009,wemadeanoffertoacquireeachoutstandingCadburyordinaryshare,includingeachsharerepresentedbyaCadburyADS,inexchangefor0.2589sharesofourcommonstockand300penceincash.AsoneCadburyADSrepresentsfourCadburyordinaryshares,holdersofCadburyADSswillbeentitledtoreceive1.0356sharesofourcommonstockand1,200penceincashforeachCadburyADStheytenderintheoffer.WearemakingtheofferforalloutstandingCadburyordinaryshares,includingthoserepresentedbyCadburyADSs,asfollows:
allholdersofCadburyordinaryshareswhoareU.S.holders(withinthemeaningofRule14d1(d)undertheSecuritiesExchangeActof1934(theExchangeAct))orresidentsofCanadaandallholdersofCadburyADSs,whereverlocated,arereceivingtheprospectus/offertoexchangeandrelatedtransmittalmaterialsthatwefiledwiththeSEConDecember4,2009aspartofaregistrationstatementonFormS4and
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allholdersofCadburyordinaryshareswhoarenotU.S.holdersorresidentsofCanadaarereceivingother
offerdocuments,
ineachcaseif,pursuanttothelawandregulationsapplicabletosuchholders,theyarepermittedtoreceivetherelevantdocuments.InthisProxyStatement,werefertothesedocumentsastheDecember4offerdocuments.
Basedonanexchangerateof$1.6263to1.00(asquotedbyWM/ReutersonDecember15,2009),ifthecashportionoftheconsiderationpayableintheofferwereconvertedintoU.S.dollarsonDecember15,2009,thevalueofthecashconsiderationwouldequal$4.88perCadburyordinaryshareand$19.52perCadburyADS.ThevalueofthisconsiderationinU.S.dollartermswillvarydependingontheexchangeratebetweenU.S.dollarsandpoundssterling,whichisexpectedtofluctuate.Formoreinformationonhistoricalcurrencyexchangerates,pleaseseethesectionofthisProxyStatemententitledExchangeRateInformation.
TheCadburyBoardhasrecommendedthatCadburyshareholdersrejectouroffer.However,iftheCadburyBoardlaterdecidestorecommendouroffer,itispossiblethatwewillagreewithCadburytoacquirealloftheoutstandingsharecapitalofCadburythroughaU.K.schemeofarrangementratherthanadirectoffertotheCadburyshareholders.Theshareissuanceproposalgivesustheflexibilitytomakethischangewithoutanothershareholdervote.
PossibleEquityFinancing(Seepage39)
Itispossiblethatwewilldecidetoissuecommonstock,orsecuritiesconvertibleintocommonstock,inapublicorprivateofferingtofinancetheCadburyacquisition.UnderNYSErules,anysuchissuancemaybeconsideredpartoftheCadburyacquisitionforthepurposeoftheNYSEshareholderapprovalrequirementdescribedinQuestion4underQuestionsandAnswersAbouttheSpecialMeetingandVoting.Yourapprovaloftheshareissuanceproposalwillconstituteapprovaloftheuseofsharesforsuchafinancing.
RecommendationofourBoard(Seepage40)
OurBoardhasunanimouslydeterminedthatissuingsharesofourcommonstockinconnectionwiththeproposedacquisitionofCadbury,includinganyrelatedfinancingtransaction,isinthebestinterestofKraftFoodsanditsshareholders.OurBoardunanimouslyrecommendsthatyouvotefortheshareissuanceproposalandfortheadjournmentproposal.Inreachingitsdecisiontorecommendtheshareissuanceproposal,ourBoardconsideredanumberoffactors,including: TheshareissuancewillfacilitatetheCadburyacquisition.
WebelievethefinancialrationalefortheshareissuanceandtheCadburyacquisitioniscompellingandwillprovideshortandlongtermbenefitstoourshareholders.Additionally,webelievethattheCadburyacquisitionwillbeaccretivetoearnings,issupportedbyourbalancesheetandwilldeliverareturnoninvestmentinexcessofourcostofcapital.
WebelievetheCadburyacquisitionwouldbuildonaglobalpowerhouseinsnacks,confectioneryandquick
meals,withanexceptionalportfolioofleadingbrandsaroundtheworld.
WebelievetheCadburyacquisitionwouldcreateacombinedcompanythatwillbeaglobalconfectionery
leader. WebelievethatCadburysleadingbrandsarehighlycomplementarytoourportfolio.
WebelievetheCadburyacquisitionwillallowustoactasastrongerpartnertoourcustomers,create
efficienciesforbothpartnersandmaintainbalanceasourcustomersincreasetheirscale.
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TheCadburyacquisitionwouldincreasescaleindevelopingmarketsforbothKraftFoodsandCadbury.
WebelievethatCadburysroutestomarketarehighlycomplementarytooursandthattheCadbury
acquisitionwillprovideanenhancedplatformforthecombinedcompanytodistributebothCadburysandKraftFoodsproducts.
WebelievetheCadburyacquisitionwillprovidethepotentialformeaningfulrevenuesynergiesanda
significantopportunitytorealizecostsavingsovertime.
ConditionsoftheOffer(Seepage52)
Inadditiontoshareholderapprovaloftheshareissuanceproposal,theofferforCadburyordinaryshares,includingthoserepresentedbyCadburyADSs,issubjecttoanumberofconditions.Wemaywaive,inwholeorinpart,manyoftheseconditionspriortotheexpirationoftheoffer.
InterestsofKraftFoodsandOurExecutiveOfficersandDirectorsintheShareIssuance(Seepage57)
NeitherKraftFoodsnoranyofourexecutiveofficersordirectorsbeneficiallyownanyCadburyordinarysharesorCadburyADSs.
AccountingTreatment(Seepage53)
InaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStates(U.S.GAAP),wewillaccountfortheCadburyacquisitionusingtheacquisitionmethodofaccountingforbusinesscombinations.
RegulatoryApprovals(Seepage55)
TheofferforCadburyordinaryshares,includingthoserepresentedbyCadburyADSs,is,andanyrelatedequityfinancingmaybe,conditionedon,amongotherthings,thereceiptofregulatoryapprovalsfromtheEuropeanCommissionandtheexpirationorterminationoftheapplicablewaitingperiodundertheHartScottRodinoAntitrustImprovementsActof1976(theHSRAct).OnDecember14,2009,therequiredwaitingperiodundertheHSRActexpired.
RiskFactors(Seepage25)
TheproposedCadburyacquisitioninvolvesseveralrisksthatyoushouldcarefullyconsiderwhendecidinghowtovoteattheSpecialMeeting.Forfurtherinformationregardingtheserisks,pleaseseethesectionofthisProxyStatemententitledRiskFactors.
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NOTEONCADBURYINFORMATION
Wehavetakenallinformation(otherthancertaininformationconcerningCadburyshareoptions)concerningCadbury,itsbusiness,managementandoperationspresentedorincorporatedbyreferenceinthisProxyStatementfrompubliclyavailableinformation.ThisinformationmaybeexaminedandcopiesmaybeobtainedattheplacesandinthemannersetforthinWhereYouCanFindMoreInformationonpage75ofthisProxyStatement.WearenotaffiliatedwithCadbury,andwehavenothadthecooperationofCadburysmanagementorduediligenceaccesstoCadburyoritsbusinessormanagementforthepurposesofpreparingthisProxyStatement.Therefore,nonpublicinformationconcerningCadburysbusinessandfinancialconditionwasnotavailabletousforthepurposeofpreparingthisProxyStatement.AlthoughwehavenoknowledgethatwouldindicatethatanyinformationorstatementsrelatingtoCadburycontainedorincorporatedbyreferenceinthisProxyStatementareinaccurateorincomplete,wewerenotinvolvedinthepreparationoftheinformationorthestatementsandcannotverifythem.
WerefertoKraftFoodsanditssubsidiaries,includingCadburyanditssubsidiaries,aftercompletionoftheCadburyacquisition,asthecombinedcompany.AnyfinancialinformationregardingCadburythatmaybedetrimentaltothecombinedcompanyandthathasnotbeenpubliclydisclosedbyCadbury,orerrorsinourestimatesduetothelackofcooperationfromCadbury,mayhaveanadverseeffectonthebenefitsweexpecttoachievethroughtheconsummationoftheCadburyacquisition.
PursuanttoRule409undertheSecuritiesActof1933,asamended,andRule12b21undertheExchangeAct,wehaverequestedthatCadburyprovideuswithinformationrequiredforcompletedisclosureregardingCadburysbusinesses,operations,financialconditionandmanagement.OurlegaladvisorsreceivedaletterdatedDecember15,2009inwhichCadburyrejectedourrequest.However,ifwereceivetheinformationbeforetheSpecialMeetingandweconsiderittobematerial,reliableandappropriate,thenwewillamendorsupplementthisProxyStatementtoprovidethisinformation.
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CURRENCIES
InthisProxyStatement,unlessotherwisespecifiedorthecontextotherwiserequires:
poundssterling,pounds,sterling,U.K.pounds,,penceorpeachrefertothelawfulcurrencyof
theUnitedKingdom U.S.dollars,dollarsor$eachrefertothelawfulcurrencyoftheUnitedStatesand
eurooreachrefertothecurrencyintroducedatthestartofthethirdstageofEuropeaneconomicand
monetaryunionpursuanttotheTreatyestablishingtheEuropeanCommunity,asamended.
WepublishourfinancialstatementsinU.S.dollarsandCadburypublishesitsfinancialstatementsinpoundssterling.CertainKraftFoodsandCadburyfinancialinformationincludedinthisProxyStatementwastranslatedusingcompanyspecificexchangerates.Inpreparingourfinancialstatements,wetranslatedtheresultsofoperationsofourforeignsubsidiariesintoU.S.dollarsusingaverageexchangeratesduringeachperiodindicated.WetranslatedbalancesheetaccountsintoU.S.dollarsusingexchangeratesattheendofeachperiodindicated.AccordingtoCadburyspublicfilings,inpreparingitsfinancialstatements,CadburytranslatedthebalancesheetsofitsnonU.K.subsidiariesintopoundssterlingusingexchangeratesattheendofeachperiodindicated.CadburytranslatedtheresultsofitsnonU.K.subsidiaryundertakingsintopoundssterlingatanaveragerate,calculatedusingtheexchangeratesprevailingattheendofeachmonthduringtheapplicableperiodpresented.Wearenotmakinganyrepresentationtoyouregardingthosetranslatedamounts.
PleaseseethesectionofthisProxyStatemententitledExchangeRateInformationforadditionalinformationregardingtheexchangeratesbetweenpoundssterlingandtheU.S.dollar.
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EXCHANGERATEINFORMATION
Thefollowingtableshows,fortheperiodsindicated,informationconcerningtheexchangeratebetweenU.S.dollarsandpoundssterling.TheinformationinthefollowingtableisexpressedinU.S.dollarsperpoundsterlingandisbasedonthenoonbuyingrateinNewYorkCityforcabletransfersinpoundssterlingascertifiedforcustomspurposesbytheFederalReserveBankofNewYork.Theaverageratesforthemonthlyperiodspresentedinthesetableswerecalculatedbytakingthesimpleaverageofthedailynoonbuyingrates.Theaverageratesfortheinterimperiodsandannualperiodspresentedinthesetableswerecalculatedbytakingthesimpleaverageofthenoonbuyingratesonthelastdayofeachmonthduringtherelevantperiod.
OnDecember14,2009,thelatestpracticabledateforwhichsuchinformationwasavailablepriortotheprintingofthisProxyStatement,thenoonbuyingratewas$1.624per1.00.ThesetranslationsshouldnotbeconstruedasarepresentationthattheU.S.dollaramountsactuallyrepresent,orcouldbeconvertedinto,poundssterlingattheratesindicated.
PeriodendRate
AverageRate High Low
RecentMonthlyData November2009 $1.648 $1.660 $1.680 $1.638October2009 1.648 1.621 1.661 1.588September2009 1.600 1.632 1.670 1.591August2009 1.631 1.653 1.698 1.621July2009 1.671 1.638 1.671 1.603June2009 1.645 1.637 1.655 1.598May2009 1.616 1.542 1.616 1.488April2009 1.480 1.471 1.499 1.440March2009 1.430 1.417 1.473 1.376February2009 1.428 1.442 1.494 1.422January2009 1.441 1.446 1.525 1.366December2008 1.462 1.485 1.546 1.440November2008 1.535 1.533 1.616 1.479
InterimPeriodData NinemonthsendedSeptember30,2009 $1.600 $1.544 $1.698 $1.366SixmonthsendedJune30,2009 1.645 1.494 1.655 1.366NinemonthsendedSeptember30,2008 1.780 1.947 2.031 1.750SixmonthsendedJune30,2008 1.991 1.975 2.031 1.941
AnnualData(YearendedDecember31,) 2008 $1.462 $1.854 $2.031 $1.4402007 1.984 2.002 2.110 1.9242006 1.959 1.843 1.979 1.7262005 1.719 1.815 1.929 1.7142004 1.916 1.836 1.948 1.754
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FORWARDLOOKINGSTATEMENTS
CertainstatementscontainedorincorporatedbyreferenceinthisProxyStatementmayconstituteforwardlookingstatements.AllstatementsinthisProxyStatement,otherthanthoserelatingtohistoricalinformationorcurrentcondition,areforwardlookingstatements.Theseforwardlookingstatementsaresubjecttoanumberofrisksanduncertainties,manyofwhicharebeyondourcontrol,thatcouldcauseouractualresultstodiffermateriallyfromthoseindicatedinanysuchstatements.Suchfactorsinclude,butarenotlimitedto,continuedvolatilityofinputcosts,pricingactions,increasedcompetition,ourabilitytodifferentiateourproductsfromretailerbrands,unanticipatedexpensesinconnectionwithlitigation,settlementoflegaldisputes,regulatoryinvestigationsorenforcementactions,ourindebtednessandabilitytopayourindebtedness,theshiftinconsumerpreferencetolowerpricedproducts,risksfromoperatingoutsidetheUnitedStates,taxlawchanges,failuretoobtainnecessaryregulatoryapprovalsorrequiredfinancingortosatisfyanyoftheotherconditionsoftheproposedacquisitionofCadbury,adverseeffectsonthemarketpriceofourcommonstockandonouroperatingresultsbecauseofafailuretocompletetheproposedacquisition,failuretorealizetheexpectedbenefitsoftheproposedacquisition,significanttransactioncostsand/orunknownliabilitiesandgeneraleconomicandbusinessconditionsthataffectthecombinedcompanyfollowingthecompletionoftheproposedacquisition.Formoreinformationontheseandotherfactorsthatcouldaffectourforwardlookingstatements,pleasealsoseethesectionofthisProxyStatemententitledRiskFactorsandtheriskfactorsinourfilingswiththeSEC,includingourmostrecentlyfiledAnnualReportonForm10KandsubsequentreportsonForms10Qand8Kincorporatedbyreferenceherein.WedisclaimanddonotundertakeanyobligationtoupdateorreviseanyforwardlookingstatementinthisProxyStatementexceptasrequiredbyapplicablelaworregulation.
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SELECTEDHISTORICALCONSOLIDATEDFINANCIALDATAOFKRAFTFOODS
ThefollowingtablesetsforththeselectedhistoricalconsolidatedfinancialandoperatingdataofKraftFoodsfortheninemonthperiodsendedSeptember30,2009and2008andforeachoftheyearsinthefiveyearperiodendedDecember31,2008.Thefollowingdatahavebeenderivedfromtheannualauditedconsolidatedfinancialstatements,includingtheconsolidatedbalancesheetsatDecember31,2008and2007andtherelatedconsolidatedstatementsofincomeandofcashflowsforeachofthethreeyearsintheperiodendedDecember31,2008andnotestheretoandtheunauditedSelectedFinancialDataSummarycontainedinKraftFoodsCurrentReportonForm8KfiledwiththeSEConNovember3,2009.ThedatafortheninemonthsendedSeptember30,2009and2008havebeenderivedfromunauditedconsolidatedfinancialstatementsofKraftFoodscontainedinKraftFoodsQuarterlyReportonForm10QforthequarterendedSeptember30,2009,andwhich,intheopinionofmanagement,includealladjustments,consistingonlyofnormalrecurringadjustments,necessaryforafairstatementoftheresultsfortheunauditedinterimperiods.AllhistoricalfinancialinformationpresentedwithrespecttoKraftFoodsispreparedinaccordancewithU.S.GAAP,whichdiffersfromInternationalFinancialReportingStandards(IFRS)inanumberofsignificantrespects.ForageneraldiscussionofthesignificantdifferencesbetweenIFRSandU.S.GAAP,pleaseseethesectionofthisProxyStatemententitledSummaryofSignificantDifferencesBetweenIFRSandU.S.GAAP.Historicalresultsarenotindicativeoftheresultstobeexpectedinthefutureandresultsofinterimperiodsarenotnecessarilyindicativeofresultsfortheentireyear.
ThissummaryinformationisderivedfromandshouldbereadinconjunctionwiththefinancialstatementsandrelatednotesincorporatedbyreferenceintothisProxyStatement,asdescribedinIncorporationbyReferenceonpage76ofthisProxyStatement.
Ninemonthsended
September30, YearendedDecember31, 2009 2008 2008 2007 2006 2005 2004 (inmillions,exceptforpershareandemployeedata) SummaryofOperations: Netrevenues $29,361 $31,251 $41,932 $35,858 $33,018 $32,779 $30,859Costofsales 18,890 20,777 28,088 23,656 21,190 21,115 19,474Operatingincome 4,218 3,513 3,843 4,176 4,158 4,373 4,327Operatingmargin 14.4% 11.2% 9.2% 11.6% 12.6% 13.3% 14.0%Interestandotherexpense,net 915 934 1,240 604 510 635 666Earningsfromcontinuing
operationsbeforeincometaxes 3,303 2,579 2,603 3,572 3,648 3,738 3,661Provisionforincometaxes 986 834 755 1,080 816 1,066 1,165Earnings/(loss)fromdiscontinued
operations,netofincometaxes 968 1,045 232 233 (33) 219Netearnings 2,317 2,713 2,893 2,724 3,065 2,639 2,715Noncontrollinginterest 6 7 9 3 5 3 3NetearningsattributabletoKraft
Foods 2,311 2,706 2,884 2,721 3,060 2,636 2,712BasicEPSattributabletoKraft
Foods: Continuingoperations 1.56 1.15 1.22 1.56 1.70 1.57 1.45Discontinuedoperations 0.63 0.70 0.15 0.14 (0.02) 0.13
NetearningsattributabletoKraftFoods 1.56 1.78 1.92 1.71 1.84 1.55 1.58
DilutedEPSattributabletoKraftFoods:
Continuingoperations 1.56 1.14 1.21 1.56 1.70 1.57 1.45Discontinuedoperations 0.63 0.69 0.14 0.14 (0.02) 0.13
NetearningsattributabletoKraftFoods 1.56 1.77 1.90 1.70 1.84 1.55 1.58
Dividendsdeclaredpershare 0.87 0.83 1.12 1.04 0.96 0.87 0.77Dividendsdeclaredasa%ofBasic
EPS 55.8% 46.6% 58.3% 60.8% 52.2% 56.1% 48.7%Dividendsdeclaredasa%of
DilutedEPS 55.8% 46.9% 58.9% 61.2% 52.2% 56.1% 48.7%
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SELECTEDHISTORICALCONSOLIDATEDFINANCIALDATAOFKRAFTFOODS(cont)
Ninemonthsended
September30, YearendedDecember31, 2009 2008 2008 2007 2006 2005 2004 (inmillions,exceptforpershareandemployeedata)Weightedaverageshares
Basic 1,477 1,516 1,505 1,591 1,659 1,699 1,720Weightedaverageshares
Diluted 1,485 1,527 1,515 1,600 1,661 1,699 1,720Netcashprovidedby
operatingactivities 3,269 2,529 4,141 3,571 3,720 3,464 4,008Capitalexpenditures 749 901 1,367 1,241 1,169 1,171 1,006Depreciation 644 734 963 873 884 869 868Property,plantand
equipment,net 10,409 10,638 9,917 10,778 9,693 9,817 9,985Inventories,net 4,073 4,792 3,881 4,238 3,436 3,272 3,365Totalassets 66,669 67,029 63,173 68,132 55,548 57,597 59,905Longtermdebt 18,108 18,874 18,589 12,902 7,081 8,475 9,723Totaldebt 20,725 20,593 20,251 21,009 10,821 11,200 12,518Totallongtermliabilities 29,402 30,176 29,773 23,574 16,520 19,285 20,903TotalKraftFoods
ShareholdersEquity 25,125 22,295 27,407 28,536 29,574 29,888TotalEquity 25,211 26,554 22,356 27,445 28,562 29,600 29,924Bookvaluepercommon
shareoutstanding 17.02 18.08 15.18 17.87 17.44 17.71 17.53Marketpricepercommon
sharehigh/low 29.84/20.81 34.97/28.04 34.97/24.75 37.20/29.95 36.67/27.44 35.65/27.88 36.06/29.45
Closingpriceofcommonshareatperiodend 26.27 32.75 26.85 32.63 35.70 28.17 35.61
Price/earningsratioatperiodendBasic 17 18 14 19 19 18 23
Price/earningsratioatperiodendDiluted 17 19 14 19 19 18 23
Numberofcommonsharesoutstandingatperiodend 1,476 1,469 1,469 1,534 1,636 1,670 1,705
Numberofemployees N/A N/A 98,000 103,000 90,000 94,000 98,000
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SELECTEDHISTORICALCONSOLIDATEDFINANCIALDATAOFCADBURY
ThefollowingtablesetsforththeselectedhistoricalconsolidatedfinancialandoperatingdataofCadburyforthesixmonthperiodsendedJune30,2009and2008andforeachoftheyearsinthefiveyearperiodendedDecember31,2008.
WearenotaffiliatedwithCadbury,andwehavenothadthecooperationofCadburysmanagementorduediligenceaccesstoCadburyoritsbusinessormanagementforthepurposesofpreparingthisProxyStatement.Therefore,nonpublicinformationconcerningCadburysbusinessandfinancialconditionwasnotavailabletousforthepurposeofincludingselectedhistoricalconsolidatedfinancialdataofCadburyfortheninemonthperiodendedSeptember30,2009.WehaverequestedcurrentfinancialinformationfromCadbury,includingfinancialinformationfortheninemonthperiodendedSeptember30,2009.OurlegaladvisorsreceivedaletterdatedDecember15,2009inwhichCadburyrejectedourrequest.However,ifwedoreceivesuchinformationinatimelymanner,wewouldincludeselectedhistoricalconsolidatedfinancialdataofCadburyfortheninemonthperiodendedSeptember30,2009inthisProxyStatement.
TheinformationwithrespecttothesixmonthsendedJune30,2009and2008hasbeenderivedfromtheunauditedconsolidatedfinancialstatementsofCadburycontainedinCadburysReportonForm6KfurnishedtotheSEConJuly29,2009.Thefollowingdata,insofarasitrelatestoeachoftheyears2004through2008,havebeenderivedfromannualconsolidatedfinancialstatements,includingtheconsolidatedbalancesheetsatDecember31,2008and2007andtherelatedconsolidatedstatementsofincomeandofcashflowsforeachofthethreeyearsintheperiodendedDecember31,2008andnotestheretocontainedinCadburysAnnualReportonForm20FfortheyearendedDecember31,2008.AllhistoricalfinancialinformationpresentedwithrespecttoCadburyispreparedinaccordancewithIFRS.CadburysconsolidatedfinancialstatementswerepreparedinpoundssterlingandinaccordancewithIFRS,whichdiffersfromU.S.GAAPinanumberofsignificantrespects.ForageneraldiscussionofthesignificantdifferencesbetweenIFRSandU.S.GAAP,pleaseseethesectionofthisProxyStatemententitledSummaryofSignificantDifferencesBetweenIFRSandU.S.GAAP.Historicalresultsarenotindicativeoftheresultstobeexpectedinthefutureandresultsofinterimperiodsarenotnecessarilyindicativeofresultsfortheentireyear.
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SELECTEDHISTORICALCONSOLIDATEDFINANCIALDATAOFCADBURY(cont)
ThissummaryinformationisderivedfromandshouldbereadinconjunctionwiththefinancialstatementsandrelatednotesincorporatedbyreferenceintothisProxyStatement,asdescribedinIncorporationbyReferenceonpage76ofthisProxyStatement.
Sixmonthsended
June30, YearendedDecember31, 2009 2008 2008 2007 2006 2005 2004 (inmillionsofpoundssterling,exceptforpersharedata) ContinuingOperations Revenue 2,767 2,440 5,384 4,699 4,483 4,295 3,990Tradingcosts (2,462) (2,226) (4,803) (4,258) (4,071) (3,799) (3,576)Restructuringcosts (105) (70) (194) (165) (107) (62) (110)Nontradingitems 1 (6) 1 2 23 5 17ProfitfromOperations 201 138 388 278 328 439 321Shareofresultinassociates 3 4 10 8 (15) 13 11
Profitbeforefinancingandtaxation 204 142 398 286 313 452 332Investmentrevenue 18 28 52 56 50 45 51Financecosts (110) (36) (50) (88) (119) (174) (196)Profitbeforetaxation 112 134 400 254 244 323 187Taxation (33) 26 (30) (105) (68) 24 11Profitfortheperiodfromcontinuingoperations 79 160 370 149 176 347 198Discontinuedoperations(1)
(Loss)/profitfortheperiodfromdiscontinuedoperations 234 (47) (4) 258 989 429 349
Profitfortheperiod 313 113 366 407 1,165 776 547Attributableto:
Equityholdersoftheparent 313 113 364 405 1,169 765 525Minorityinterests 2 2 (4) 11 22
313 113 366 407 1,165 776 547Earningspershare Fromcontinuinganddiscontinuedoperations
Basic 23.1p 6.0p 22.6p 19.4p 56.4p 37.3p 25.9pDiluted 23.1p 6.0p 22.6p 19.2p 55.9p 36.9p 25.7p
Fromcontinuingoperations Basic 5.8p 8.5p 22.8p 7.0p 8.7p 16.4p 8.7pDiluted 5.8p 8.5p 22.8p 7.0p 8.6p 16.2p 8.6p
EarningsperADR(2) Fromcontinuinganddiscontinuedoperations
Basic 92.4p 24.0p 90.4p 77.6p 225.6p 149.2p 103.6pDiluted 92.4p 24.0p 90.4p 76.8p 223.6p 147.6p 102.8p
Fromcontinuingoperations Basic 23.2p 34.0p 91.2p 28.0p 34.8p 65.6p 34.8pDiluted 23.2p 34.0p 91.2p 28.0p 34.4p 64.8p 34.4p
(1) CadburysbeveragebusinessesinEuropeandSouthAfricaweresoldin2006.In2008,Cadburycompletedthe
demergerofitsAmericasBeveragesbusinessandannouncedithadenteredintoaconditionalagreementtoselltheAustraliaBeveragesbusiness.OnMarch12,2009,CadburyenteredintoadefinitivesaleandpurchaseagreementforthesaleofAustraliaBeverages.Allofthesebusinesseshavebeenclassifiedasdiscontinuedoperationsandthe2004to2007financialinformationhasbeenrepresentedaccordingly.
(2) EachCadburyADR(i.e.,ADS)representsfourordinaryshares.
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SELECTEDUNAUDITEDPROFORMACOMBINEDFINANCIALDATA
ThefollowingselectedunauditedproformafinancialdatafortheyearendedDecember31,2008andforthesixmonthperiodendedJune30,2009,thedateofthelatestpubliclyavailablefinancialinformationofCadbury,showtheeffectoftheCadburyacquisitiononKraftFoodsresultsofoperationsasifithadoccurredonJanuary1,2008.ThefollowingunauditedproformabalancesheetdataatJune30,2009showtheeffectoftheCadburyacquisitiononKraftFoodsfinancialpositionasifithadoccurredonthatdate.
WearenotaffiliatedwithCadbury,andwehavenothadthecooperationofCadburysmanagementorduediligenceaccesstoCadburyoritsbusinessormanagementforthepurposesofpreparingthisProxyStatement.Therefore,nonpublicinformationconcerningCadburysbusinessandfinancialconditionwasnotavailabletousforthepurposeofpresentingproformacombinedfinancialdatafortheninemonthperiodendedSeptember30,2009.WehaverequestedcurrentfinancialinformationfromCadbury,includingfinancialinformationfortheninemonthperiodendedSeptember30,2009.OurlegaladvisorsreceivedaletterdatedDecember15,2009inwhichCadburyrejectedourrequest.However,ifwedoreceivesuchinformationinatimelymanner,wewouldcompileproformacombinedfinancialdatafortheninemonthperiodendedSeptember30,2009andincludeitinthisProxyStatement.
TheunauditedproformafinancialdataincludedinthisProxyStatementarebasedonthehistoricalfinancialstatementsofKraftFoodsandCadbury,andonpubliclyavailableinformationandcertainassumptionsthatwebelievearereasonable,whicharedescribedinthenotestotheUnauditedU.S.GAAPProFormaFinancialInformationincludedinthisProxyStatement.Significantly,wehavenotperformedanyduediligenceordetailedvaluationanalysisnecessarytodeterminethefairmarketvaluesoftheCadburyassetstobeacquiredandliabilitiestobeassumed.Accordingly,theproformafinancialstatementsdonotincludeanallocationofthepurchaseprice,unlessspecifiedotherwise.
TheinformationinthefollowingtablehasbeenderivedfromtheunauditedconsolidatedfinancialstatementsofKraftFoodscontainedinKraftFoodsQuarterlyReportonForm10QforthequarterendedJune30,2009,theauditedconsolidatedfinancialstatementsofKraftFoodscontainedinKraftFoodsCurrentReportonForm8KfiledwiththeSEConNovember3,2009,theunauditedconsolidatedfinancialstatementsofCadburycontainedinCadburysReportonForm6KfurnishedtotheSEConJuly29,2009andtheauditedconsolidatedfinancialstatementsofCadburycontainedinCadburysAnnualReportonForm20FfortheyearendedDecember31,2008.
WehavetranslatedtheCadburyfiguresinthissectionfrompoundssterlingintoU.S.dollarsusingaverageexchangeratesapplicableduringtheperiodspresentedfortheunauditedproformaconsolidatedstatementsofearningsandtheperiodendexchangeratefortheunauditedproformaconsolidatedbalancesheet,asdescribedinthesectionofthisProxyStatemententitledUnauditedU.S.GAAPProFormaFinancialInformation.
CadburysconsolidatedfinancialstatementsarepreparedinaccordancewithIFRS,whichdiffersinanumberofsignificantrespectsfromU.S.GAAP.ForageneraldiscussionofthesignificantdifferencesbetweenIFRSandU.S.GAAP,pleaseseethesectionofthisProxyStatemententitledSummaryofSignificantDifferencesBetweenIFRSandU.S.GAAP.
ThefollowingshouldbereadinconnectionwiththesectionofthisProxyStatemententitledUnauditedU.S.GAAPProFormaFinancialInformation,andotherinformationincludedinorincorporatedbyreferenceintothisProxyStatement.
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SELECTEDUNAUDITEDPROFORMACOMBINEDFINANCIALDATA(cont)
Thefollowingproformafinancialinformationispresentedforillustrativepurposesonlyandisnotnecessarilyindicativeoftheresultsofoperationsandfinancialpositionthatwouldhavebeenachievedhadtheconsummationoftheacquisitiontakenplaceonthedateindicatedorofthefutureoperationsofthecombinedcompany.ThefollowingtableshouldbereliedononlyforthelimitedpurposeofpresentingwhattheresultsofoperationsandfinancialpositionofthecombinedbusinessesofKraftFoodsandCadburymighthavelookedlikehadtheacquisitionbeenconsummatedatanearlierdate.ForadiscussionoftheassumptionsandadjustmentsmadeinthepreparationoftheproformafinancialinformationpresentedinthisProxyStatement,pleaseseethesectionofthisProxyStatemententitledUnauditedU.S.GAAPProFormaFinancialInformation.
Forthesixmonthsended
June30,2009
Fortheyearended
December31,2008 ProFormaCombined
(inmillions,
exceptpercentagesandpersharedata) StatementofOperations Netrevenues $ 23,656 $ 52,031Costofsales 14,819 33,478Operatingincome 3,027 4,467Operatingmargin 12.8% 8.6%Interestandotherexpense,net 806 1,443Earningsfromcontinuingoperationsbeforeincometaxes 2,221 3,024Provisionforincometaxes 722 717Earningsfromcontinuingoperationsattributabletoshareholders 1,495 2,294Basicearningspersharefromcontinuingoperations 0.81 1.23Dilutedearningspersharefromcontinuingoperations 0.81 1.22WeightedaveragesharesBasic 1,842 1,871WeightedaveragesharesDiluted 1,850 1,881
AsofJune30,2009
Proformacombined
(inmillions,exceptpersharedata)
BalanceSheetData Property,plantandequipment,net $ 13,057Inventories,net 5,407Totalassets 89,875Longtermdebt 27,521Totaldebt 30,334Totallongtermliabilities 41,354TotalShareholdersEquity 33,675TotalEquity 33,771Bookvaluepershareoutstanding 18.29Numberofsharesoutstandingatperiodend 1,841
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HISTORICALANDPROFORMAPERSHAREDATA
Thetablesetforthbelowdepictsthebasicanddilutedearningspershare,cashdividendsdeclaredpershareandbookvaluepersharefor(a)KraftFoodsandCadburyonahistoricalbasis,(b)thecombinationofKraftFoodsandCadburyonaproformacombinedbasisand(c)Cadburyincomparisonwiththeequivalentproformanetincomeandbookvaluepershareattributableto0.2589ofashareofKraftFoodscommonstockthatwillbereceivedforeachCadburyordinaryshare,includingeachsharerepresentedbyaCadburyADS,exchangedintheCadburyacquisition,basedontheaverageexchangeratefortheperiod.TheproformadataofthecombinedcompanywerederivedbycombiningthehistoricalconsolidatedfinancialinformationofKraftFoodsandusingtheacquisitionmethodofaccountingforbusinesscombinationsasdescribedinthesectionofthisProxyStatemententitled,TheOfferAccountingTreatment.ForadiscussionoftheassumptionsandadjustmentsmadeinthepreparationoftheproformafinancialinformationpresentedinthisProxyStatement,seethesectionofthisProxyStatemententitledUnauditedU.S.GAAPProFormaFinancialInformation.
WearenotaffiliatedwithCadbury,andwehavenothadthecooperationofCadburysmanagementorduediligenceaccesstoCadburyoritsbusinessormanagementforthepurposesofpreparingthisProxyStatement.Therefore,nonpublicinformationconcerningCadburysbusinessandfinancialconditionwasnotavailabletousforthepurposeofpresentinghistoricalandproformapersharedatafortheninemonthperiodendedSeptember30,2009.WehaverequestedcurrentfinancialinformationfromCadbury,includingfinancialinformationfortheninemonthperiodendedSeptember30,2009.OurlegaladvisorsreceivedaletterdatedDecember15,2009inwhichCadburyrejectedourrequest.However,ifwedoreceivesuchinformationinatimelymanner,wewouldcompilehistoricalandproformapersharedatafortheninemonthperiodendedSeptember30,2009andincludeitinthisProxyStatement.
CadburysconsolidatedfinancialstatementsarepreparedinaccordancewithIFRS,whichdiffersinanumberofsignificantrespectsfromU.S.GAAP.ForageneraldiscussionofthesignificantdifferencesbetweenIFRSandU.S.GAAP,pleaseseethesectionofthisProxyStatemententitledSummaryofSignificantDifferencesBetweenIFRSandU.S.GAAP.
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YoushouldreadtheinformationpresentedinthetablebelowtogetherwiththehistoricalfinancialstatementsofKraftFoodsandCadburyandtherelatednotesandtheUnauditedU.S.GAAPProFormaFinancialInformationappearingelsewhereinthisProxyStatementorincorporatedhereinbyreference.Theproformadataareunauditedandforillustrativepurposesonly.Thecompaniesmayhaveperformeddifferentlyhadtheyalwaysbeencombined.YoushouldnotrelyonthisinformationasbeingindicativeofthehistoricalresultsthatwouldhavebeenachievedhadthecompaniesalwaysbeencombinedorthefutureresultsthatthecombinedcompanywillachieveaftertheconsummationoftheCadburyacquisition.
Forthesixmonthsended
June30,2009 Yearended
December31,2008KraftFoodshistoricaldata Earningspersharefromcontinuingoperations
Basic $ 1.01 $ 1.22Diluted 1.00 1.21
Cashdividendsdeclaredpershare 0.58 1.12Bookvaluepershare 16.47
Cadburyhistoricaldata Earningspersharefromcontinuingoperations
Basic 5.8p 22.8pDiluted 5.8p 22.8p
Cashdividendsdeclaredpershare 5.7p 16.4pBookvaluepershare 227.0p
Unauditedproformacombined Earningspershare
Basic $ 0.81 $ 1.23Diluted 0.81 1.22
Cashdividendsdeclaredpershare(1) 0.58 1.12Bookvaluepershare 18.29
Equivalentbasisunauditedproformacombined Earningspershare
Basic 14.2p 16.9pDiluted 14.1p 16.8p
Cashdividendsdeclaredpershare(1) 10.1p 15.5pBookvaluepershare 288.1p (1) SameashistoricalsincenochangeindividendpolicyisexpectedasaresultoftheCadburyacquisition.
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COMPARATIVEMARKETPRICEANDDIVIDENDINFORMATION
OurcommonstockistradedontheNYSEunderthesymbolKFT.CadburyordinarysharesaretradedontheLondonStockExchange(LSE)underthesymbolCBRY,andCadburyADSsaretradedontheNYSEunderthesymbolCBY.
Thefollowingtablesetsforth,fortheperiodsindicated,thepersharehighandlowsalespricesofourcommonstockandCadburyADSsontheNYSEandCadburyordinarysharesontheLSE,aswellasthedividendsdeclaredthereon.ThesharepricesinthetablehavebeenobtainedfromFactSet.CadburyordinaryshareandCadburyADSdividendnumbershavebeenobtainedfrompubliclyavailableinformationpublishedbyCadbury.
KraftFoods
commonstock($) Cadburyordinaryshares(p) CadburyADSs($) High Low Dividend High Low Dividend High Low Dividend2007,quarterended
March31 35.91 30.20 0.25 656.50 529.00 9.90 51.41 40.74 0.772June30 36.74 30.33 0.25 723.50 652.00 5.00 57.30 51.37 N/ASeptember30 36.33 31.15 0.27 680.00 534.50 N/A 54.30 42.78 0.406December31 35.20 32.30 0.27 641.00 570.00 N/A 53.24 46.90 N/A
2008,quarterended March31 32.70 28.81 0.27 625.00 539.50 10.50 49.56 43.43 N/AJune30(1) 32.82 28.39 0.27 N/A N/A N/A N/A N/A N/A
April1May1 N/A N/A N/A 586.50 556.50 N/A 46.61 43.86 0.844May2June30 N/A N/A N/A 704.50 609.50 N/A 56.01 48.55 N/A
September30 34.97 28.40 0.29 661.50 565.50 5.30 50.94 40.32 0.4195December31 33.54 24.87 0.29 605.50 453.25 N/A 40.09 29.65 N/A
2009 January1March31 29.57 21.00 0.29 619.00 497.25 11.10 37.18 28.06 0.6394April1June30 27.04 22.05 0.29 554.50 486.50 N/A 35.99 28.78 N/AJuly1September30 28.81 25.70 0.29 805.00 520.00 5.70 52.53 33.91 0.376October1December1 27.64 25.95 N/A 814.00 758.00 N/A 54.00 49.72 N/A
(1) OnMay2,2008,CadburyplcwasinsertedasanewholdingcompanyaboveCadburySchweppesplc,tradingonthe
LSEwithasecondarylistingontheNYSEviaanAmericanDepositaryReceiptprogramandbegantradingasastandaloneconfectionerycompany.OnMay7,2008,CadburycompletedthedemergerofitsAmericasBeveragesbusinessasDr.PepperSnappleGroup.ThemarketpricesforCadburyinthetableaboveincludethevalueoftheAmericasBeveragesbusinessthroughsuchdate.OnMay1,2008,thelasttradingdaypriortoCadburytradingasastandaloneconfectionerycompany,theclosingpriceperCadburySchweppesordinarysharewas574.50pandtheclosingpriceperCadburySchweppesADSwas$45.46.OnMay2,2008,thefirstdaythatCadburytradedasastandalonecompany,theclosingpriceperCadburyordinarysharewas640.00pandtheclosingpriceperCadburyADSwas$51.60.
Thefollowingtableshows,asofSeptember4,2009,thelastfulltradingdaybeforewepubliclyannouncedapossibleofferforacombinationwithCadbury,November6,2009,thelastfulltradingdaybeforewepubliclyannouncedafirmintentiontomakeanoffertoacquireCadbury,andDecember1,2009,thelastpracticabledaybeforewemadetheoffer,theclosingpricepershareofourcommonstockandCadburyADSontheNYSEandtheclosingpriceperCadburyordinaryshareontheLSE.Thistablealsopresentstheimpliedequivalentvaluepersecurity.TheimpliedequivalentvalueofaCadburyordinarysharewascalculatedbymultiplyingtheclosingmarketpricepershareofourcommonstockontheNYSEby0.2589,theexchangeratioforeachCadburyordinarysharetenderedintheoffer,andthenaddingtothatamountthecashportionoftheexchangeconsiderationof300pencepayableforeachCadburyordinarysharetenderedintheoffer.Theimpliedequivalent
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valueofaCadburyADSwascalculatedbymultiplyingtheclosingmarketpricespershareofourcommonstockby1.0356,theimpliedexchangeratioforeachCadburyADStenderedintheoffer,andthenaddingtothatamountanamountinU.S.dollarsequaltothecashportionoftheexchangeconsiderationof1,200pencepayableforeachCadburyADStenderedintheoffer.UnlessCadburyshareholderselecttoreceiveallcashorallsharesofKraftFoodscommonstockunderthemixandmatchfacility(asdescribedinthesectionofthisProxyStatemententitledTheOfferTermsoftheOffer),theywillreceivetheofferconsiderationinamixtureofcashandsharesofKraftFoodscommonstockonthetermssetforthintheDecember4offerdocumentsanddescribedinthisProxyStatement.
Incalculatingtheimpliedequivalentvaluesbelow,amountsinU.S.dollarshavebeentranslatedintopoundssterling,inthecaseofCadburyordinaryshares,andamountsinpoundssterlinghavebeentranslatedintoU.S.dollars,inthecaseofCadburyADSs,ineachcaseasfollows:
atarateof1.00=$1.6346,asquotedbyWM/ReutersonSeptember4,2009
atarateof1.00=$1.6609,asquotedbyWM/ReutersonNovember6,2009and
atarateof1.00=$1.6627,asquotedbyWM/ReutersonDecember1,2009.
KraftFoods
commonstock($)
CadburySecurity ImpliedEquivalentValueper
CadburySecurity
ordinaryshares(p)
ADSs($)(1)
ordinaryshares(p)(2)
ADSs($)(2)
September4,2009 28.10 568.00 37.46 745.07 48.72November6,2009 26.78 758.00 50.50 717.44 47.66December1,2009 26.50 806.00 53.24 712.63 47.40(1) EachCadburyADSrepresentsfourCadburyordinaryshares.
(2) UnlessCadburyshareholderselecttoreceiveallcashorallsharesunderthemixandmatchfacility,theywillreceivetheofferconsiderationinamixtureofcashandsharesofKraftFoodscommonstockonthetermssetforthintheDecember4offerdocumentsanddescribedinthisProxyStatement.
Themarketpricesofourcommonstock,CadburyordinarysharesandCadburyADSsarelikelytofluctuatepriortotheexpirationdateoftheofferandcannotbepredicted.Weurgeyoutoobtaincurrentmarketinformationregardingourcommonstock,CadburyordinarysharesandCadburyADSs.
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RISKFACTORS
BeforedecidinghowtovoteyoursharesattheSpecialMeeting,youshouldconsidercarefullythefollowingriskfactors,andtheotherrisksandinformationcontainedinthisProxyStatementandinthedocumentsincorporatedhereinbyreference.PleaseseeWhereYouCanFindMoreInformationonpage75ofthisProxyStatementforinformationonwhereyoucanfindadditionalriskfactorsandotherinformationincorporatedbyreferenceinthisProxyStatement.
RiskFactorsRelatingtotheProposedCadburyAcquisitionandtheOffer
OurexistingshareholderswillbedilutedasaconsequenceoftheissuanceofourcommonstockpursuanttotheproposedCadburyacquisitionandtheywillhavereducedownershipandvotinginterestsinKraftFoodsfollowingcompletionoftheCadburyacquisition.
ExistingKraftFoodsshareholderswillownasmallerpercentageofourcommonstockthantheycurrentlyown.Weestimatethat,ifweissuedall370millionofthesharesweareseekingapprovaltoissue,existingKraftFoodsshareholderswillownapproximately80%ofthesharesofourcommonstockoutstandingimmediatelyaftertheCadburyacquisition,includinganyrelatedequityfinancing,iscompleted.
RisksofexecutingtheproposedCadburyacquisitioncouldcausethemarketpriceofourcommonstocktodecline.
ThemarketpriceofourcommonstockmaydeclineasaresultoftheCadburyacquisition,amongotherreasons,if: theintegrationofCadburysbusinessisdelayedorunsuccessful
wedonotachievetheexpectedbenefitsofouracquisitionofCadburyasrapidlyortotheextentanticipatedby
us,financialanalystsorinvestorsoratall
theeffectoftheCadburyacquisitiononourfinancialresultsisnotconsistentwiththeexpectationsoffinancial
analystsorinvestors
formerCadburyshareholderssellasignificantnumberofsharesofourcommonstockaftercompletionofthe
Cadburyacquisitionor
wefailtoacquire100%oftheCadburyordinaryshares,includingthoserepresentedbyCadburyADSs,inthe
Cadburyacquisitionorthroughthecompulsoryacquisitionprocess.
ThenumberofsharesofourcommonstockthatwillbeissuedtoCadburyshareholderspursuanttotheCadburyacquisitionwillbenotmorethan370million,representingapproximately20%oftheissuedandoutstandingsharesofourcommonstock,asincreasedasaresultoftheCadburyacquisition,calculatedatDecember15,2009.IfasignificantproportionofCadburyshareholderswhoreceiveourcommonstockintheofferseektosellthoseshareswithinashortperiodaftercompletionoftheoffer,thiscouldcreatesellingpressureinthemarketforourcommonstockoraperceptionthatsuchsellingpressuremaydevelop,eitherofwhichmayadverselyaffectthemarketfor,andthemarketpriceof,ourcommonstock.
Failuretoacquire100%oftheCadburyordinaryshares,includingCadburyADSs,mayaffectourabilitytocompleteanypostclosingrestructuringofCadburyanditssubsidiaries.Thiscouldreduceordelaythecostsavingsorrevenuebenefitstothecombinedcompany.
ToeffectacompulsoryacquisitionoftheremainingCadburyordinaryshares,includingthoserepresentedbyCadburyADSs,wewillneedtofirstobtainatleast90%oftheCadburyordinarysharestowhichtheoffer
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relates,includingthoserepresentedbyCadburyADSs.UnlikedomesticU.S.corporations,Englishcorporationscannotmergewithanothercorporationwiththeapprovalofamajorityshareholdervote.Theofferisconditionaluponvalidacceptancesbeingreceived(andnot,wherepermitted,withdrawn)inrespectofnotlessthan90%ofCadburyordinaryshares,includingthoserepresentedbyCadburyADSs,butthispercentagemaybereducedbyustoanypercentageabove50%.Werethisconditiontobereduced,wecouldcompletetheofferwithoutbeingabletoacquirecompulsorilytheremainingCadburyordinaryshares,includingthoserepresentedbyCadburyADSs,wedonotown.WewouldthenbeentitledtoexercisecontrolofCadburyandaffectthecompositionoftheCadburyBoard.However,dependingonthelevelofacceptancesreceived,wemaynotcontrolsufficientvotingrightstodelistCadburyfromtheOfficialListmaintainedbytheUnitedKingdomFinancialServicesAuthorityandfromtradingontheLSEitmaytakelongerandbemoredifficulttoeffectanypostclosingrestructuringandthefullamountofthecostsynergiesandrevenuebenefitsidentifiedforthecombinedcompanymaynotbeobtainedormayonlybeobtainedoveralongerperiodoftime.Inaddition,ifweownlessthan100%ofCadburyaftercompletionoftheoffer,wemaynotbeabletocarryoutjointcashpoolingorotherintracompanytransactionswithCadburyanditssubsidiariesonfavorabletermsoratall.Thismayadverselyaffectourabilitytoachievetheexpectedamountofcostsynergiesandrevenuebenefitsaftertheofferiscompleted.
Wemustobtaingovernmentalandregulatoryconsentstocompletetheoffer,which,ifdelayed,notgrantedorgrantedwithonerousconditions,mayjeopardizeordelaytheoffer,resultinadditionalexpendituresofmoneyandresourcesand/orreducetheanticipatedbenefitsoftheacquisition.
Theofferisconditionalon,amongotherthings,thereceiptofregulatoryapprovalsfromregulatorswithjurisdictionovertheoperationsofKraftFoodsandCadbury.OnDecember14,2009,therequiredwaitingperiodundertheHSRActexpired.Thegovernmentalagenciesfromwhichweseektheseapprovalshavediscretioninadministeringthegoverningregulations.AsaconditiontotheirapprovaloftheCadburyacquisition,agenciesmayimposerequirements,limitationsorcostsorrequiredivestituresorplacerestrictionsontheconductofthecombinedcompanysbusiness.Theserequirements,limitations,costs,divestituresorrestrictionscouldjeopardizeordelaytheconsummationoftheofferormayreducetheanticipatedbenefitsoftheCadburyacquisitiontothecombinedcompany.Furthermore,wemaynotbeabletoobtaintherequiredconsentsandapprovalsand,ifso,therequiredconditionsoftheoffermaynotbesatisfied.Evenifalloftherequiredconsentsandapprovalsareobtainedandtheconditionstotheconsummationoftheofferaresatisfied,wewillnotnecessarilybeabletocontroltheterms,conditionsandtimingoftheapprovals.Ifweagreetoanymaterialrequirements,limitations,costs,divestituresorrestrictionsinordertoobtainanyapprovalsrequiredtoconsummatetheoffer,theserequirements,limitations,additionalcostsorrestrictionscouldadverselyaffectthetwocompaniesabilitytointegratetheiroperationsorreducetheanticipatedbenefitsoftheproposedCadburyacquisition.Thiscouldresultinadelayincompletionof,oradecisionnottocomplete,theCadburyacquisition,orhaveamaterialadverseeffectonthebusinessandresultsofoperationsofthecombinedcompany.PleaseseethesectionofthisProxyStatemententitledTheOfferConditionsoftheOfferforadiscussionofcertainconditionsoftheofferandthesectionofthisProxyStatemententitledTheOfferRegulatoryApprovalsforadescriptionofthematerialregulatoryapprovalsnecessaryinconnectionwiththeoffer.
EvenifamaterialadversechangetoCadburysbusinessorprospectsweretooccur,incertaincircumstances,wemaynotbeabletoinvoketheofferconditionsandterminatetheoffer,whichcouldreducethevalueofourcommonstock.
Completionoftheofferissubjecttoanumberofconditions,includingthatthereisnomaterialadversechangeaffectingCadburybeforetheofferbecomes,orisdeclared,whollyunconditional.UndertheU.K.CityCodeonTakeoversandMergers(theU.K.TakeoverCode),andexceptfortheminimumacceptanceconditionandtheconditionsrelatingtotheEuropeanCommissionantitrustapproval(asdescribedinthesectionofthisProxyStatemententitledTheOfferRegulatoryApprovals),wemayinvokeaconditiontotheoffertocausetheoffernottoproceedonlyiftheU.K.PanelonTakeoversandMergers(theU.K.TakeoverPanel)issatisfiedthatthecircumstancesgivingrisetothatconditionnotbeingsatisfiedareofmaterialsignificancetoKraftFoodsinthecontextoftheoffer.Becauseofthisconsentrequirement,theconditionsmayprovideuslessprotectionthanthecustomaryconditionsinanofferforaU.S.domesticcompany.
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IfamaterialadversechangeaffectingCadburyweretooccurandtheU.K.TakeoverPaneldoesnotallowustoinvokeaconditiontocausetheoffernottoproceed,themarketpriceofourcommonstockmaydeclineorourbusinessorourfinancialconditionmaybemateriallyadverselyaffected.
WehavenothadthecooperationofCadburysmanagementorduediligenceaccesstoCadburyoritsbusinessormanagementforthepurposesofpreparingthisProxyStatement.
WehavenothadthecooperationofCadburysmanagementorduediligenceaccesstoCadburyoritsbusinessormanagementforthepurposesofpreparingthisProxyStatement.Accordingly,wehavepreparedtheinformationin,orincorporatedbyreferenceinto,thisProxyStatementbasedonlyonpubliclyavailableinformationregardingCadburyandsuchinformationhasnotbeensubjecttocommentorverificationbyCadbury,usortheirorourdirectors.
WehavenoknowledgethatanyinformationorstatementsrelatingtoCadburycontainedin,orincorporatedbyreferenceinto,thisProxyStatementareinaccurateorincomplete.However,wewerenotinvolvedinthepreparationofsuchinformationandstatementsand,therefore,cannotverifytheaccuracy,completenessortruthofsuchinformationoranyfailurebyCadburytodiscloseeventsthatmayhaveoccurred,butthatareunknowntous,thatmayaffectthesignificanceoraccuracyofanysuchinformation.
Inaddition,wehavemadecertainassumptionsrelatingtotheforecastlevelofcostsavings,synergiesandassociatedcostsoftheCadburyacquisitionbasedonlyonpubliclyavailableinformationregardingCadbury.Ourassumptionsrelatingtotheforecastlevelofcostsavings,synergiesandassociatedcostsoftheCadburyacquisitionmaybeinaccurate.
Further,thecompletionoftheCadburyacquisitionmaygiverisetotherightofcontractualcounterpartiestoterminatematerialsupplyandothercontractswithCadburyorresultinotherconsequencesasaresultofmattersunknowntous.Assuch,theremaybeothermattersrelatingtoCadburythatareunknownbyusandthatmayhaveanadverseeffectonthecombinedcompanysfinancialconditionandresultsofoperationsand/orresultinsubstantialadditionalcostsorliabilities.
WhetherornottheCadburyacquisitioniscompleted,theannouncementandprospectofthesuccessfulcompletionoftheCadburyacquisitioncouldcausedisruptionsinthebusinessesofKraftFoodsand/orCadbury,whichcouldhavematerialadverseeffectsontheirbusinessesandfinancialresults,aswellasonthebusinessprospectsandfinancialresultsofthecombinedcompany.
WhetherornottheCadburyacquisitioniscompleted,theannouncementandprospectofthesuccessfulcompletionoftheCadburyacquisitioncouldcausedisruptionsinthebusinessesofKraftFoodsand/orCadbury.Specifically,iftheCadburyacquisitionsucceeds,somecurrentandprospectiveemployeesmayexperienceuncertaintyabouttheirfutureroleswithinthecombinedcompany,whichmayadverselyaffectKraftFoodsandCadburysabilitiestoretainorrecruitkeymanagersandotheremployees.IfKraftFoodsandCadburyfailtomanagetheseriskseffectively,thebusinessandfinancialresultsofKraftFoods,Cadburyandthecombinedcompanycouldbeadverselyaffected.
Iftherearesignificant,unforeseendifficultiesintegratingthebusinessoperationsofKraftFoodsandCadbury,theycouldadverselyaffectthebusinessofthecombinedcompany.
Weintend,totheextentpossible,tointegrateouroperationswiththoseofCadbury.Ourgoalinintegratingtheseoperationsistoincreaserevenuesthroughenhancedgrowthopportunitiesandachievecostsavingsbytakingadvantageofthesignificantanticipatedsynergiesofconsolidation.However,wemayencounterdifficultiesintegratingouroperationswithCadburysoperations,resultinginadelayorthefailuretoachievetheanticipatedsynergies,includingtheexpectedincreasesinearningsandcostsavings.Ifsuchdifficultiesaresignificant,thiscouldadverselyaffectthebusinessofthecombinedcompany.
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Wemayincurhigherthanexpectedintegration,transactionandacquisitionrelatedcosts.
Weexpecttoincuranumberofnonrecurringcostsassociatedwithcombiningtheoperationsofthetwocompanies,includingimplementationcashcostsestimatedtobeapproximately$1.2billioninthefirstthreeyearsfollowingcompletionoftheCadburyacquisition.Inaddition,wewillincurlegal,accountingandtransactionfeesandothercostsrelatedtotheoffer.Someofthesecostsarepayableregardlessofwhethertheofferiscompletedandsuchcostsmaybehigherthananticipated.
Althoughwebelievethattheeliminationofduplicativecosts,aswellastherealizationofotherefficienciesrelatedtotheintegrationofthebusinesses,willoffsettheseimplementationandacquisitioncostsovertime,thisnetbenefitmaynotbeachievedwithintheexpectedtimetable.Inaddition,someofthesecostscouldbehigherthanweanticipate,whichcouldreducethenetbenefitsofthetransactionandimpactourresultsofoperations.
Thetermsoftheofferaresubjecttochange.
Wehavereservedtherightto,inoursolediscretion,increasethevalueofouroffertoCadburyshareholders,whichcouldresultinuspayingadditionalcashconsiderationorissuingadditionalsharesofourcommonstock.IfanytermoftheCadburyacquisitiondescribedinthisProxyStatementchangesinamannerthatwebelieveismaterialtoourshareholders,wewillsupplementthisProxyStatementtoinformyouofsuchchangeand,iflegallyrequired,resolicitproxiesfromourshareholders.
Shareholdersinthecombinedcompanywillbemoreexposedtocurrencyexchangeratefluctuationsas,followingcompletionoftheCadburyacquisition,therewillbeanincreasedproportionofassets,liabilitiesandearningsdenominatedinforeigncurrencies.
AsaresultofthesuccessfulcompletionoftheCadburyacquisition,thefinancialresultsofthecombinedcompanywillbemoreexposedtocurrencyexchangeratefluctuationsandanincreasedproportionofassets,liabilitiesandearningswillbedenominatedinnonU.S.dollarcurrencies.
ThecombinedcompanywillpresentitsfinancialstatementsinU.S.dollarsandwillhaveasignificantproportionofnetassetsandincomeinnonU.S.dollarcurrencies,primarilypoundssterlingandtheeuro,aswellasarangeofemergingmarketcurrencies.Thecombinedcompanysfinancialresultsandcapitalratioswillthereforebesensitivetomovementsinforeignexchangerates.AdepreciationofnonU.S.dollarcurrenciesrelativetotheU.S.dollarcouldhaveanadverseimpactonthecombinedcompanysfinancialresults.
RiskFactorsRelatingtoOurBusinessandtheBusinessoftheCombinedCompany
Weoperateinahighlycompetitiveindustry,whichmayaffectourprofitability.
Thefoodindustryishighlycompetitive.Wecompetebasedonprice,productinnovation,productquality,brandrecognitionandloyalty,effectivenessofmarketing,promotionalactivityandtheabilitytoidentifyandsatisfyconsumerpreferences.
Fromtimetotime,wemayneedtoreduceourpricesinresponsetocompetitiveandcustomerpressuresandtomaintainourmarketshare.Competitionandcustomerpressuresmayalsorestrictourabilitytoincreasepricesinresponsetocommodityandotherinputcostincreases.Ourresultsofoperationswillsufferifprofitmarginsdecrease,asaresultofareductioninprices,increasedinputcostsorotherfactors,andifweareunabletoincreasesalesvolumestooffsetthoseprofitmargindecreases.
Retailersareincreasinglyofferingretailerbrandsthatcompetewithsomeofourproducts.Itisimportantthatourproductsprovidehighervalueand/orqualitytoourconsumersthanlessexpensivealternatives.Ifthedifferenceinvalueorqualitybetweenourproductsandthoseofretailerbrandsnarrows,orifsuchdifferencein
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qualityisperceivedtohavenarrowed,thenconsumersmaynotbuyourproducts.Furthermore,duringperiodsofeconomicuncertainty,suchashavebeenexperiencedintherecentpastandmaybeexperiencedinthefuture,consumerstendtopurchasemoreretailerbrandsorothereconomybrands,whichcouldreducesalesvolumesofourproductsorshiftourproductmixtoourlowermarginofferings.Ifwearenotabletomaintainorimproveourbrandimageorvalueproposition,itcouldhaveamaterialeffectonourmarketshareandourprofitability.
Wemayalsoneedtoincreasespendingonmarketing,advertisingandnewproductinnovationtoprotectexistingmarketshareorincreasemarketshare.Thesuccessofourinvestmentsissubjecttorisks,includinguncertaintiesabouttradeandconsumeracceptance.Asaresult,ourincreasedexpendituresmaynotmaintainorenhancemarketshareandcouldresultinlowerprofitability.
Theconsolidationofretailcustomers,thelossofasignificantcustomeroramaterialreductioninsalestoasignificantcustomercouldaffectouroperatingmargins,ourprofitability,oursalesandourresultsofoperations.
Retailcustomers,suchassupermarkets,warehouseclubsandfooddistributorsintheUnitedStates,theEuropeanUnionandourothermajormarkets,continuetoconsolidate.Theseconsolidationshaveproducedlarge,sophisticatedcustomerswithincreasedbuyingpower.Theselargerretailers,capableofoperatingwithreducedinventories,canresistpriceincreasesanddemandlowerpricing,increasedpromotionalprogramsandspecificallytailoredproducts.Theyalsomayuseshelfspacecurrentlyusedforourproductsfortheirownretailerbrands.Theconsolidationofretailcustomersalsoincreasestheriskthatasevereadverseimpactontheirbusinessoperationscouldhaveacorrespondingmaterialadverseeffectonus.Also,ourretailcustomersmaybeaffectedbyrecenteconomicconditions.Forexample,theymaynothaveaccesstofundsorfinancingandthatcouldcausethemtodelay,decreaseorcancelpurchasesofourproducts,ortonotpayusortodelaypayingusforpreviouspurchases.
During2008,ourfivelargestcustomersaccountedforapproximately27%ofournetrevenues,withourlargestcustomer,WalMartStores,Inc.,accountingforapproximately16%ofournetrevenues.Therecanbenoassurancethatallsignificantcustomerswillcontinuetopurchaseourproductsinthesamequantitiesthattheyhaveinthepast.Thelossofanyoneofoursignificantcustomersoramaterialreductioninsalestoasignificantcustomercouldhaveamaterialadverseeffectonoursalesandresultsofoperations.
Increasedpricevolatilityforcommoditieswepurchasemayaffectourprofitability.
Weareamajorpurchaserofcommodities,includingdairy,coffee,cocoa,wheat,cornp