Kraft Foods is in talks to arrange about $8 billion of financing for its bid to buy candy maker Cadbury, according to two people with knowledge of the matter, reported Bloomberg. Citigroup and Deutsche Bank are working on setting up debt financing to cover about half of the 9.77 billion-pound ($16 billion) offer to buy Cadbury, said the sources. The financing would consist of a bridge loan to be repaid with the proceeds of an investment-grade bond offering, one of the people said. Kraft is working with credit companies to maintain investment-grade ratings, CEO Irene Rosenfeld said. Kraft has about $1.25 billion of bonds maturing by August 2010. Meanwhile, another report has said Kraft is planning to slash the number of suppliers it deals with. Kraft said it plans to cut its supplier base in half, a move that would affect more than 30,000 companies, as the food maker looks to save more than $300 million a year, reported Reuters. The company is looking to consolidate its purchasing of everything from ingredients to packaging materials is part of a plan to improve productivity that also will encompass logistics and manufacturing. The review of purchasing comes as the company tries to simplify a procurement framework that evolved as Kraft acquired numerous companies over the years. Kraft informed its suppliers in March that it was conducting the purchasing review. That review puts existing suppliers not only in competition with each other for Kraft’s business, but also with potential new suppliers.
Kraft Pursues $8B Cadbury Financing, Slashes Suppliers
The financing would consist of a bridge loan to be repaid with the proceeds of an investment-grade bond offering.
September 9, 2009