Northfield, Ill., June 25 - Kraft Foods Inc. today announced that it has commenced its exchange offer related to the split-off transaction of its Post cereals business.
The split-off transaction is in connection with the merger of Cable Holdco, Inc., a wholly owned subsidiary of Kraft that will own certain assets and liabilities of the Post cereals business, and a subsidiary of Ralcorp Holdings, Inc. As previously announced, Kraft entered into a definitive agreement on November 15, 2007, to distribute and merge its Post cereals business into Ralcorp.
In this split-off transaction, Kraft shareholders will have the option to exchange some or all of their shares of Kraft common stock and receive shares of Cable Holdco common stock. The value of Kraft shares and Cable Holdco common stock will be calculated using the simple arithmetic average of the daily volume-weighted average prices of Kraft common stock and Ralcorp common stock on the New York Stock Exchange on the last three trading days of the offer.
This exchange offer is designed to permit Kraft shareholders to exchange their shares of Kraft common stock for shares of Cable Holdco common stock at a 10 percent discount to the per share value of Ralcorp common stock, subject to a limit of 0.6613 shares of Cable Holdco common stock per Kraft share. The Cable Holdco common stock will then immediately be exchanged for shares of Ralcorp common stock on a one-for-one basis following the merger of Cable Holdco and a Ralcorp subsidiary. Ultimately, at the conclusion of this exchange offer and the subsequent merger of Cable Holdco and Ralcorp, Kraft shareholders will own up to 0.6613 shares of Ralcorp for each Kraft share exchanged.
If the exchange ratio limit of 0.6613 shares of Cable Holdco common stock per Kraft share is reached, then the exchange offer will be subject to a two business day mandatory extension described in the exchange offer materials being sent to Kraft shareholders.
The exchange is expected to be tax-free to participating Kraft shareholders for U.S. federal income tax purposes. The exchange offer will expire at 8:00 a.m., New York City time, on August 4, 2008, unless extended, and will coincide with the closing of the merger of the Post cereals business and Ralcorp. The transactions are subject to customary closing conditions, including Ralcorp shareholder approval. As a result of the exchange offer, the number of Kraft's outstanding shares will be reduced.
Approximately 30.5 million shares of Cable Holdco will be offered in exchange for Kraft common stock, subject to adjustments in certain circumstances. The exchange offer will be subject to proration if the offer is over-subscribed, and the number of shares Kraft accepts in the exchange offer may be less than the number of shares tendered.
If the exchange offer is consummated but not fully subscribed, then the remaining shares of Cable Holdco common stock owned by Kraft will be distributed as a pro rata dividend to Kraft shareholders.