Charles R. Blyth FundStanford’s Premier Investing Group

Meeting NotesWednesday January 20, 2010

Kraft-Cadbury

01/21/10Kraft-Cadbury

Agenda

• Next Monday – Finance Session in Econ140• Sign up for email list on blythfund.stanford.edu• Recent News• ATVI Pitch

01/21/10Kraft-Cadbury

Kraft - Cadbury

• Acquisition closed at $19.4 bn• 60% Cash and 40% Stock

– Cash vs . Stock in M&A Transactions• Cash is taxed today but less dilution• Want to hold stock in future growing company• Stock swap more common in strong markets and less

common in volatile markets

– Buffet happy, minimal dilution

01/21/10Kraft-Cadbury

Kraft - Cadbury

• Pros– Kraft can potentially realize $650mm in cost savings– Kraft’s geographic reach can now expand to developing

markets– Shareholders received 50% premium in share price

• Cons– 30% of Cadbury’s shares were owned by institutional

investors – Cost savings may result in more bad-tasting chocolate– Layoffs in Cadbury’s UK unit to cut costs– Many potential cultural post-merger conflicts &

implementation