Kraft and Cadbury Merger Analysis Essay

2343 Words Mar 29th, 2011 10 Pages
On February 2, 2010 Kraft and Cadbury, two leading firms in the snack industry finalized their merger decision after five months of negotiation. In this report we will examine why it made strategic sense for the two companies to combine and evaluate the performance of the combined companies since its merger. In particular we will analyze the post-merger financial statements and highlight a few points regarding the accounting.

INTRODUCTION OF KRAFT AND CADBURY

Kraft Foods Inc. (KFT) is the world’s largest food processing company with revenues of $40 billion (fiscal year 2009) which sells its products in more than 150 countries. We are familiar with many of its global brands – Oreo, Philadelphia Cream Cheese, Trident, Nabisco,
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The expenses included in SG&A were, transaction related fees of $2 million for the three months after the acquisition and $217 million in the remaining nine months of the fiscal year, ending Sep 30, 2010. Another $11 million was expensed in the three and nine months ending September 30, 2009. In Addition, Kraft also incurred acquisition financing fees of $96 million in the first quarter of 2010 and recorded this expense in interest and other expenses, net account. As a result, SG&A expenses rose more than 40% in nine months ending September 2010 from 2009. The 2010 increase in general and administrative expenses was predominantly due to acquisition related transaction fees, Integration costs and the impact of Cadbury's corporate charges.

PERFORMANCE OF COMBINED FIRMS (3 months)

Kraft’s consolidated financial statement, indicates that the company is profiting from its core competences. The most significant increases in net revenues and operating income are, form its successful entry into emerging markets and accessing wide
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