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Companies
Acquirer Kraft
Target Kellogg
Transaction Date 12/19/2008
Page 1
MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
Proforma Balance Sheet
($ in millions)
Kraft Kellogg Proforma
Balance Sheet September 30, September 28, Negative Positive September 30,
Assets 2008 2008 Adjustments Adjustments 2008
Cash $737.0 $684.0 $0.0 $0.0 $1,421.0
Accounts Receivable $4,709.0 $1,243.0 $0.0 $0.0 $5,952.0
Inventory $4,664.0 $907.0 $0.0 $0.0 $5,571.0
Deferred Income Taxes $754.0 $145.0 $0.0 $0.0 $899.0
Other Current Assets $393.0 $128.0 $0.0 $0.0 $521.0
Total Current Assets $11,257.0 $3,107.0 $0.0 $0.0 $14,364.0
Liabilities
CPLTD $719.0 $2.0 $0.0 $0.0 $721.0
Accounts Payable $3,439.0 $1,134.0 $0.0 $0.0 $4,573.0
Accrued Marketing $1,751.0 $417.0 $0.0 $0.0 $2,168.0
Accrued Income Taxes $0.0 $30.0 $0.0 $0.0 $30.0
Accrued Employment Costs $902.0 $262.0 $0.0 $0.0 $1,164.0
Other Current Liabilities $2,484.0 $388.0 $0.0 $0.0 $2,872.0
Total Current Liabilities $9,295.0 $2,233.0 $0.0 $0.0 $11,528.0
Shareholders Equity
Common Stock $0.0 $105.0 ($105.0) $14,657.3 $14,657.3
Additional paid-in Capital $23,505.0 $424.0 ($424.0) $0.0 $23,505.0
Retained Earnings $13,623.0 $4,790.0 ($4,790.0) $0.0 $13,623.0
Accumulated Losses ($2,005.0) ($888.0) $888.0 $0.0 ($2,005.0)
Treasury Stock, at Cost ($8,722.0) ($1,812.0) $1,812.0 $0.0 ($8,722.0)
Total Shareholders Equity $26,401.0 $2,619.0 ($2,619.0) $14,657.3 $41,058.3
Page 2
MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
Proforma Financial Statements
Revenue
Kraft $42,684.0 $43,795.5 $44,155.6
Kellogg $12,683.0 $13,074.2 $13,483.5
Synergies $0.0 $0.0
Total Revenue $55,367.0 $56,869.7 $57,639.1
% Growth 2.7% 1.4%
SG&A Expenses
Kraft $9,398.0 $9,163.0 $9,201.1
Kellogg $3,440.0 $3,535.5 $3,706.6
Synergies $0.0 $0.0
Total SG&A Expenses $12,838.0 $12,698.5 $12,907.7
SG&A as % of Revenue 23.2% 22.3% 22.4%
Page 3
MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
Proforma Financial Statements
Liabilities
CPLTD $721.0 $760.0 $507.0
Accounts Payable $4,573.0 $4,695.91 $4,736.78
Accrued Marketing $2,168.0 $2,226.3 $2,245.6
Accrued Income Taxes $30.0 $30.8 $31.1
Accrued Employment Costs $1,164.0 $1,195.3 $1,205.7
Other Current Liabilities $2,872.0 $2,949.2 $2,974.9
Total Current Liabilities $11,528.0 $11,857.5 $11,701.1
Page 4
MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
Proforma Financial Statements
Page 5
MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
Proforma Financial Statements
Long-Term Debt
Beginning Balance $23,603.0 $23,306.0
(Paydown) / Drawdown ($297.0) ($760.0)
Ending Balance $23,306.0 $22,546.0
Interest Rate 6% 6%
Interest Expense $1,407.27 $1,375.56
Page 6
MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
Proforma Financial Statements
Page 7
MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
HISTORIC VARIABLES AND ASSUMPTIONS FOR PROJECTIONS
Capex Assumptions
Kraft - Capex $1,284.0 $1,365.4 $1,379.1
Kellogg - Capex 3.80% $475.0 $496.8 $471.9
Capex Synergies $0.0 $0.0 $0.0
Total Capex $1,759.0 $1,862.2 $1,851.0
Capex as % of Sales 3.2% 3.3% 3.2%
Asset Disposition $0.0 $0.0 $0.0
Days Payable 46 46 46
Accrued Marketing as % of COGS 6.1% 6.1% 6.1%
Accrued Income Taxes as % of COGS 0.1% 0.1% 0.1%
Accrued Employment Costs as % of COGS 3.3% 3.3% 3.3%
Other Current Liabilities as % of COGS 8.0% 8.0% 8.0%
Deferred Income Taxes $6,147.0 $6,147.0 $6,147.0
Accrued Pension Costs $771.0 $771.0 $771.0
Accrued Postretirement Costs $2,890.0 $2,890.0 $2,890.0
Other Liabilities $3,206.0 $3,206.0 $3,206.0
Interest Rates
Revolving Line of Credit 6.00% 6.00% 6.00%
Long-Term Debt 6.00% 6.00% 6.00%
Interest earned on cash 4.00% 4.00% 4.00%
Page 8
MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
Synergies Analysis
($ in millions)
Fiscal Year Ending Dec 31,
Revenue LTM PF 2008P 2009P
Kraft $42,684 $43,796 $44,156
Kellogg $12,683 $13,074 $13,484
Synergies $0 $0
% Revenue Increase 0% 0%
COGS as % of Sales
Kraft 67% 66% 66%
Kellogg 57% 58% 58%
% COGS Margin Improvement 0% 0%
SG&A Expenses
Kraft $9,398 $9,163 $9,201
Kellogg $3,440 $3,536 $3,707
Synergies $0 $0
SG&A as % of Sales
Kraft 22% 21% 21%
Kellogg 27% 27% 27%
% COGS Margin Improvement 0% 0%
Page 9