MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG

($ and shares in millions, except for per share prices)

Companies
Acquirer Kraft
Target Kellogg
Transaction Date 12/19/2008

Shares Outstanding (fully diluted) Earnings Per Share 2008E 2009E

Err:502 1,475.3 Err:502 $1.91 $2.00
Err:502 381.7 Err:502 $3.01 $3.15

Current Share Price Price / Earnings Ratio

Err:502 $26.67 Err:502 14.0x 13.3x
Err:502 $42.63 Err:502 14.2x 13.5x
Err:502 15.9x 15.2x
Premium for Target Shares 13%
Err:502 $48.00
Accretion / Dilution 2008E 2009E
Proforma Net Income $2,902.7 $3,142.3
Err:502 $18,321.6 Proforma Shares Outstanding 2,024.8 2,024.8
Err:502 $23,186.6 Earnings Per Share $1.43 $1.55

Err:502 % Per Share Total EPS Accretion / (Dilution) -24.9% -22.4%

Cash Component 20% $9.60 $3,664.3
Err:502 80% $38.40 $14,657.3 Base Case Upside Choose
Total 100% $48.00 $18,321.6 Synergy Assumptions: 1 2 1
Revenue Improvement 0% 1% 0%
Sources for Cash Component Gross Margin Improvement 0% 1% 0%
Cash on Balance Sheet $0.0 SG&A as % of Sales Improvement 0% 1% 0%
Interest Rate earned on Cash 4%
New Debt $3,664.3 Income Statement Statistics Base Case Upside
Interest Rate on New Debt 6% 2008P
Revenue $56,869.7 $57,438.4
Sources for Acquirer Share Issues EBITDA $7,489.1 $9,195.2
Exchange Ratio 1.44x Net Income $2,902.7 $4,029.8
Err:502 549.6 EBITDA Margin 13% 16%
Proforma Shares Outstanding 2,024.8 Net Income Margin 5% 7%
EPS Accretion / (Dilution) -24.9% 6.6%
Proforma Ownership
Err:502 72.9% 2009P
Err:502 27.1% Revenue $57,639.1 $58,215.5
Total 100% EBITDA $7,730.0 $9,459.2
Net Income $3,142.3 $4,318.2
Goodwill $15,702.6 EBITDA Margin 13% 16%
Additional Amortizable Intangibles $0.0 Net Income Margin 5% 7%
Amortize Intangibles? (yes or no) No EPS Accretion / (Dilution) -22.4% 6.6%
If yes, how many years? 20

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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

Gross PP&E $18,903.0 $7,499.0 $0.0 $0.0 $26,402.0

Cumulative Depreciation $8,265.0 $4,432.0 $0.0 $0.0 $12,697.0
Net PP&E $10,638.0 $3,067.0 $0.0 $0.0 $13,705.0

Goodwill $28,573.0 $3,652.0 $0.0 $15,702.6 $47,927.6

Intangible Assets $13,496.0 $1,449.0 $0.0 $0.0 $14,945.0
Prepaid Pension Costs $1,712.0 $511.0 $0.0 $0.0 $2,223.0
Other Assets $1,269.0 $252.0 $0.0 $0.0 $1,521.0
Total Assets $66,945.0 $12,038.0 $0.0 $15,702.6 $94,685.6

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

Revolving Line of Credit $1,000.0 $1,539.0 $0.0 $3,664.3 $6,203.3

Long-Term Debt $18,874.0 $4,008.0 $0.0 $0.0 $22,882.0
Deferred Income Taxes $5,439.0 $708.0 $0.0 $0.0 $6,147.0
Accrued Pension Costs $771.0 $0.0 $0.0 $0.0 $771.0
Accrued Postretirement Costs $2,890.0 $0.0 $0.0 $0.0 $2,890.0
Other Liabilities $2,275.0 $931.0 $0.0 $0.0 $3,206.0
Total Liabilities $40,544.0 $9,419.0 $0.0 $3,664.3 $53,627.3

Minority Interests $0.0 $0.0 $0.0 $0.0 $0.0

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

Total Liabilities and Equity $66,945.0 $12,038.0 ($2,619.0) $18,321.6 $94,685.6

Check $0.0 $0.0 ($2,619.0) $2,619.0 $0.0

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MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
Proforma Financial Statements

PROJECTED FINANCIAL STATEMENTS

($ in millions) Fiscal Year Ending December 31,
LTM Sept. 2008 2008P 2009P
Income Statement (1)

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%

COGS (Excludes D&A)

Kraft $28,446.0 $29,118.5 $29,230.5
Kellogg $7,276.0 $7,563.6 $7,770.9
Synergies $0.0 $0.0
Total COGS $35,722.0 $36,682.1 $37,001.4
COGS as % of Revenue 64.5% 64.2%

Gross Profit $19,645.0 $20,187.6 $20,637.7

Gross Profit 35.5% 35.5% 35.8%

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%

Depreciation & Amortization $1,347.0 $1,373.7 $1,405.5

Operating Income / EBIT $5,460.0 $6,115.4 $6,324.5

Operating Income / EBIT Margin 9.9% 10.8% 11.0%

EBITDA $6,807.0 $7,489.1 $7,730.0

EBITDA Margin 12.3% 13.2% 13.4%
EBITDA Growth na 10.0% 3.2%

Interest Expense na $1,678.2 $1,490.3

Interest Income na $28.4 $0.0
Net Interest Expense na $1,649.7 $1,490.3

Other Income / (Expense)

Pretax Income $4,465.7 $4,834.2

Taxes $1,563 $1,692

Tax Rate 35.0% 35.0%

Net Income $2,902.7 $3,142.3

Net Margin 5.1% 5.5%
Net Income Growth na 8.3%
(1) Source for Revenue, COGS, SG&A Projections: Credit Suisse Equity Research reports.

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MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
Proforma Financial Statements

PROJECTED FINANCIAL STATEMENTS

($ in millions) Fiscal Year Ending December 31,
LTM Sept. 2008 2008P 2009P
Balance Sheet
Assets
Cash $1,421.0 $0.0 $0.0
Accounts Receivable $5,952.0 $6,113.5 $6,196.3
Inventory $5,571.0 $5,720.73 $5,770.53
Deferred Income Taxes $899.0 $923.40 $935.9
Other Current Assets $521.0 $535.1 $542.4
Total Current Assets $14,364.0 $13,292.8 $13,445.1

Gross PP&E $26,402.0 $28,264.2 $30,115.2

Cumulative Depreciation $12,697.0 $14,070.7 $15,476.2
Net PP&E $13,705.0 $14,193.5 $14,639.0

Goodwill $47,927.6 $47,927.6 $47,927.6

Intangible Assets $14,945.0 $14,945.0 $14,945.0
Prepaid Pension Costs $2,223.0 $2,283.33 $2,314.23
Other Assets $1,521.0 $1,562.28 $1,583.42
Total Assets $94,685.6 $94,204.5 $94,854.3

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

Revolving Line of Credit $6,203.3 $2,826.1 $997.1

Long-Term Debt $22,882.0 $22,546.0 $22,039.0
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
Total Liabilities $53,627.3 $50,243.6 $47,751.1

Minority Interest $0.0 $0.0 $0.0

Total Shareholders Equity $41,058.3 $43,961.0 $47,103.2

Total Liabilities and Equity $94,685.6 $94,204.5 $94,854.3

Check $0.0 - $0.0

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MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
Proforma Financial Statements

PROJECTED FINANCIAL STATEMENTS

($ in millions) Fiscal Year Ending December 31,
LTM Sept. 2008 2008P 2009P
Cash Flow
Net Income $2,902.7 $3,142.3
Plus / (minus):
Depreciation and Amortization $1,374 $1,406
Changes in Working Capital
Accounts Receivable ($161.5) ($82.7)
Inventory ($149.7) ($49.8)
Deferred Income Taxes ($24.4) ($12.5)
Other Current Assets ($14.1) ($7.2)
Accounts Payable $122.9 $40.9
Accrued Marketing $58.3 $19.4
Accrued Income Taxes $0.8 $0.3
Accrued Employment Costs $31.3 $10.4
Other Current Liabilities $77.2 $25.7
Change in Goodwill $0.0 $0.0
Change in Intangible Assets $0.0 $0.0
Change in Prepaid Pension Costs ($60.3) ($30.9)
Change in Other Assets ($41.3) ($21.1)
Change in Deferred Income Taxes $0.0 $0.0
Change in Accrued Pension Costs $0.0 $0.0
Change in Accrued Postretirement Costs $0.0 $0.0
Change in Other Liabilities $0.0 $0.0
Cash Flows from Operations $4,115.4 $4,440.1

Cash Flows from Investing

Capital Expenditures ($1,862.2) ($1,851.0)
Asset Dispostions $0.0 $0.0
Cash Flows from Investing ($1,862.2) ($1,851.0)

Cash Flows from Financing

Revolving Line of Credit ($3,377.2) ($1,829.1)
Long-Term Debt ($297.0) ($760.0)
Deferred Income Taxes $0.0 $0.0
Accrued Pension Costs $0.0 $0.0
Accrued Postretirement Costs $0.0 $0.0
Other Liabilities $0.0 $0.0
Total Cash Flows from Financing ($3,674.2) ($2,589.1)

Total Cash Flow ($1,421.0) $0.0

Beginning Cash Position $1,421.0 $0.0

Change in Cash Position ($1,421.0) $0.0
Ending Cash Position $0.0 $0.0

Cash Flow before Revolver $3,377.2 $1,829.1

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MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
Proforma Financial Statements

PROJECTED FINANCIAL STATEMENTS

($ in millions) Fiscal Year Ending December 31,
LTM Sept. 2008 2008P 2009P

Debt and Interest Schedule

Revolver
Beginning Revolver Balance $6,203.3 $2,826.1
(Paydown) / Drawdown ($3,377.2) ($1,829.1)
Ending Revolver Balance $2,826.1 $997.1
Interest Rate 6.0% 6.0%
Interest Expense $270.88 $114.70

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

Total Interest Expense Reported on Income Statement $1,678.2 $1,490.3

Interest Earned on Cash $28.4 $0.0

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MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
Proforma Financial Statements

PROJECTED FINANCIAL STATEMENTS

($ in millions) Fiscal Year Ending December 31,
LTM Sept. 2008 2008P 2009P
Depreciation and Amortiztion Schedule
Depreciation and Amortization Expense
Kraft $976.0 $993.7 $1,013.6
Kellogg $371.0 $380.0 $391.9
Total $1,347.0 $1,373.7 $1,405.5

New Amortization Expense $0.0 $0.0 $0.0

Total D&A $1,347.0 $1,373.7 $1,405.5

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MERGER ANALYSIS - KRAFT ACQUIRES KELLOGG
HISTORIC VARIABLES AND ASSUMPTIONS FOR PROJECTIONS

ASSUMPTIONS FOR PROJECTIONS

Fiscal Year Ending December 31,
LTM PF 2008P 2009P

Depreciation as % of Gross PP&E 5.1% 4.9% 4.7%

Other Income / (Expense) $0.0 0.0% 0.0%
Tax Rate 35.0% 35.0% 35.0%

Balance Sheet Drivers / Assumptions

Days Accounts Receivable 39 39 39
Days Inventory 56 56 56
Deferred Taxes as % of Revenue 1.6% 1.6% 1.6%
Other Current Assets 0.9% 0.9% 0.9%
Goodwill $47,927.6 $47,927.6 $47,927.6
Intangible Assets $14,945.0 $14,945.0 $14,945.0
Prepaid Pension Costs as % of Revenues 4.0% 4.0% 4.0%
Other Assets as % of Revenues 2.7% 2.7% 2.7%

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%

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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 (Excludes D&A)

Kraft $28,446 $29,119 $29,231
Kellogg $7,276 $7,564 $7,771
Synergies $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%

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