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Tax-Efficient Transaction to Benefit Kraft and Its Shareholders
NORTHFIELD, Ill.--(BUSINESS WIRE)--Nov. 15, 2007--Kraft Foods Inc.
(NYSE:KFT), a global leader in branded food and beverages, announced
today a definitive agreement to merge its Post cereals business into
Ralcorp Holdings, Inc. (NYSE:RAH), a leader in private-label and
frozen bakery products. The transaction is tax-efficient and worth
approximately $2.6 billion to Kraft and its shareholders. For purposes
of comparison, to have achieved an equivalent amount in a taxable
transaction, Kraft would have needed to receive approximately $4.0
billion in cash for the business.
The Post cereals business had net revenues of about $1.1 billion
in 2006 and includes such popular cereals as Honey Bunches of Oats,
Pebbles, Shredded Wheat, Selects, Grape Nuts and Honeycomb. The brands
in this transaction are distributed primarily in North America.
"This is a transaction where everyone wins -- Kraft, Ralcorp, our
respective shareholders and employees," said Irene Rosenfeld, Kraft
Chairman and CEO. "Ralcorp has an excellent opportunity to continue
building the Post brands, which have been known and loved by consumers
for generations. Kraft shareholders will benefit from the future value
created by combining the Post brands with Ralcorp. And Kraft is taking
yet another step in the transformation plan that we laid out in
February to restore the company to reliable growth."
The transaction has several benefits for Kraft and its
- It will better enable Kraft to focus its resources on its
- Value for Kraft shareholders will be optimized through a
- Kraft shareholders will own 54 percent of the new Ralcorp; and
- Ralcorp will benefit by combining Post's strong branded assets
with its private-label business and infrastructure.
In addition to the Post brands, the transaction includes four
manufacturing facilities -- Battle Creek, Mich.; Jonesboro, Ark.;
Modesto, Calif.; and Niagara Falls, Ontario -- and certain
manufacturing equipment. Kraft anticipates that approximately 1,250
employees will join Ralcorp.
"We are grateful for the hard work and dedication of our talented
employees who helped build Post into a billion-dollar brand," said
Rosenfeld. "We wish them much continued success as they join the
About the Deal
Kraft shareholders will receive at least 30.3 million shares of
Ralcorp stock at closing, and Kraft will receive approximately $960
million of cash-equivalent value. In total, this transaction
represents proceeds of approximately $2.6 billion to Kraft and its
shareholders (based on Ralcorp's closing stock price of $55.47 on
November 14, 2007).
Kraft shareholders will receive Ralcorp shares after the
distribution and subsequent merger of the Post cereals business with
Ralcorp. Based on market conditions prior to closing, Kraft will
determine whether the shares will be distributed in a spin-off or a
split-off transaction. Either type of transaction would be tax-free to
Kraft shareholders. In a spin-off transaction, all Kraft shareholders
would receive a pro rata number of shares. In a split-off transaction,
Kraft shareholders would have the option to exchange their Kraft
shares and receive Ralcorp shares at closing, resulting in a reduction
in Kraft's shares outstanding.
In a spin-off, Kraft's earnings per diluted share would be
adjusted downward by $0.13 on an annual basis. From a Kraft
shareholder perspective, this is largely offset by the earnings
attributable to ownership of Ralcorp stock. In a split-off, Kraft
expects earnings dilution on an annual basis would be approximately
$0.07 per diluted share.
Kraft and Ralcorp expect to complete the transaction in mid-2008.
The transaction is subject to customary closing conditions, including
regulatory and Ralcorp shareholder approvals.
Conference Call Today
Kraft and Ralcorp will host a joint conference call with analysts
and media at 8 a.m. EST. In the U.S., dial +1-800-322-9079; outside
the U.S., dial +1-973-582-2717. To ensure access to the conference
call, please plan to dial in at least 10 minutes before the call
starts. A rebroadcast will be available until November 22, 2007 by
calling +1-877-519-4471 in the U.S. and +1-973-341-3080 from outside
the U.S. The PIN number for both the conference call and its archived
rebroadcast is 9467722.
For access to the call via live audio webcast, please visit
www.kraft.com. An archive of the webcast will be available for one
year in the Investor Center on the company's website, www.kraft.com.
About Kraft Foods
Kraft Foods (NYSE:KFT) is one of the world's largest food and
beverage companies, with annual revenues of more than $34 billion. For
over 100 years, Kraft has offered consumers delicious and wholesome
foods that fit the way they live. Kraft markets a broad portfolio of
iconic brands in 155 countries, including six brands with revenues of
more than $1 billion, such as Kraft cheeses, dinners and dressings;
Oscar Mayer meats; Philadelphia cream cheese; Nabisco cookies and
crackers; Jacobs coffees and Milka chocolates. Kraft became a fully
independent company on March 30, 2007, and is listed in the Standard &
Poor's 100 and 500 indexes. The company is a member of the Dow Jones
Sustainability Index and the Ethibel Sustainability Index. For more
information, visit the company's website at http://www.kraft.com.
This press release contains forward-looking statements that we
intend to merge our Post cereals business into Ralcorp Holdings, Inc.;
that the transaction is tax-efficient and our belief about the worth
to Kraft and shareholders; that we would have needed to receive
approximately $4.0 billion in cash for the business to achieve an
equivalent amount in a taxable transaction; that this is a transaction
where everyone wins; that Kraft shareholders will benefit from the
future value created by combining the Post brands with Ralcorp; that
this is another step in the transformation plan to restore Kraft to
reliable growth; that the transaction has several benefits to Kraft
and our shareholders; the number of employees that will join Ralcorp;
when and how shares will be distributed; that prior to closing, we
will decide whether the shares will be distributed in a spin-off or a
split-off; our expectation regarding completion of the transaction;
the effect on diluted earnings per share and the impact on future
earnings from the transaction. These forward-looking statements
involve risks and uncertainties that could cause actual results to
differ materially from those predicted in the forward-looking
statements. Such factors, include, but are not limited to pricing
actions, delays in consummating the transaction, failure to obtain
Ralcorp shareholder approval, regulatory actions or delays related to
the particular brands included in the transaction, receipt of an IRS
ruling approving the tax-free status of the transaction, failure to
recognize expected cost savings from our restructuring program and
increased competition. For additional information on these and other
factors that could affect our forward-looking statements, see our
filings with the SEC, including our most recently filed Annual Report
on Form 10-K and subsequent reports on Form 10-Q and 8-K. We disclaim
and do not undertake any obligation to update or revise any
forward-looking statements in this press release.
In connection with the proposed transaction between Ralcorp and
Kraft, Ralcorp will file a registration statement on Form S-4 with the
SEC. Such registration statement will include a proxy statement of
Ralcorp that also constitutes a prospectus of Ralcorp, and will be
sent to the shareholders of Ralcorp. Shareholders are urged to read
the proxy statement/prospectus and any other relevant documents when
they become available, because they will contain important information
about Kraft, Ralcorp and the proposed transaction. The proxy
statement/prospectus and other documents relating to the proposed
transaction (when they are available) can be obtained free of charge
from the SEC's website at www.sec.gov. These documents (when they are
available) can also be obtained free of charge from Kraft upon written
request to Kraft Foods Inc., Three Lakes Drive, Northfield, Illinois
60093, or by calling (847) 646-5494, or from Ralcorp, upon written
request to Ralcorp Holdings Inc., 800 Market Street, Suite 2900, Saint
Louis, Missouri 63101, or by calling (314) 877-7113.
Participants in the Proposed Transaction
This communication is not a solicitation of a proxy from any
security holder of Ralcorp. However, Kraft, Ralcorp and certain of
their respective directors and executive officers may be deemed to be
participants in the solicitation of proxies from shareholders in
connection with the proposed transaction under the rules of the SEC.
Information about the directors and executive officers of Kraft may be
found in its 2006 Annual Report on Form 10-K filed with the SEC on
March 1, 2007, definitive proxy statement relating to its 2007 Annual
Meeting of Shareholders filed with the SEC on March 13, 2007 and
current report on Form 8-K filed with the SEC on November 7, 2007.
Information about the directors and executive officers of Ralcorp may
be found in its 2006 Annual Report on Form 10-K filed with the SEC on
December 13, 2006, definitive proxy statement relating to its 2006
Annual Meeting of Shareholders filed with the SEC on December 13, 2006
and current report on Form 8-K filed with the SEC on October 2, 2007.
These documents can be obtained free of charge from the sources
indicated above. Additional information regarding the interests of
these participants will also be included in the proxy
statement/prospectus regarding the proposed transaction when it
CONTACT: for Kraft Foods
Lisa Gibbons, 847-646-4538 (media)
Chris Jakubik, 847-646-5494 (investors)
SOURCE: Kraft Foods Inc.