$4.1bn will be used immediately to bail out the government owned investment company, Dubai World

The remaining $6bn will be used to support the ‘needs’ of Dubai World until April 2010

A positive move and should help improve sentiment around the entire region, given the
recent collapse in confidence

This news should be taken positively by companies in our sector with Middle East
exposure – Interserve* (BUY) and Carillion* (BUY) standout

Vikram Pandit, Chief Executive Officer, said on behalf of the entire Citi Board of Directors, “The TARP program was designed to provide assistance until banks were in a position to repay it prudently. We are pleased to be able to repay the U.S. government’s trust preferred securities and to terminate the loss-sharing agreement. We owe the American taxpayers a debt of gratitude and recognize our obligation to support the economic recovery through lending and assistance to homeowners and other borrowers in need.”

Citi will immediately issue $20.5 billion of capital and debt, comprised of:

* $17 billion of common stock, with an over-allotment option of $2.55 billion; and
* $3.5 billion of tangible equity units (consisting of approximately $2.8 billion of prepaid common stock purchase contracts (recorded as equity) and approximately $0.7 billion of subordinated notes (recorded as debt).

In connection with Citi’s offering, the U.S. Treasury (UST) will sell up to $5 billion of the common stock it holds in a concurrent secondary offering. After the secondary offering, the UST is subject to a 45-day “lock-up” period. The Treasury has also announced that it plans to sell the remainder of its shares in an orderly fashion over the next 6-12 months.

In addition, Citi has decided to issue in January 2010 $1.7 billion of common stock equivalents to employees in lieu of cash they would have otherwise received. Subject to shareholder approval at the company’s annual meeting on April 1, 2010, the common stock equivalents will be replaced by common stock.

As agreed with the U.S. government and its regulators, following the successful completion of the $17 billion common stock offering and the $3.5 billion offering of tangible equity units, Citi will repay $20 billion of TARP trust preferred securities. The repayment will result in an approximate $8 billion pre-tax loss ($5.1 billion after tax). Citi will also terminate the loss-sharing agreement with the government and cancel $1.8 billion of the $7.1 billion in trust preferred securities it originally issued to the government as consideration for the benefits provided by that agreement. This will result in an approximate pre-tax loss of $2.1 billion ($1.3 billion after tax). The termination of the loss-sharing agreement will increase Citi’s risk-weighted assets by approximately $144 billion.

Company releases its defence document this morning re the Kraft offer and a trading update.

1. Trading – FY09 guidance unchanged

Company confirmed its previous guidance for 2009 of sales growth in the middle of the 4-6% range and margin at least 135bp better y-o-y. NE 5.2% and +160bp for FY09.

No change in FY09 guidance might come as a slight disappointment; however, company says that it wanted to focus people more on medium-term targets and not lots of ST new info.

Alex Smith +44 20 7102 1459 Alex.Smith@nomura.com
David Hayes +44 20 7102 1341 David.Hayes@nomura.com
Guillaume Delmas +44 20 7102 6918 Guillaume.Delmas@nomura.com
_______________________________________________________________________________

14 December 2009

Cadbury (NEUTRAL, TP 805p)

Company releases its defence document this morning re the Kraft offer and a trading update.

1. Trading – FY09 guidance unchanged

Company confirmed its previous guidance for 2009 of sales growth in the middle of the 4-6% range and margin at least 135bp better y-o-y. NE 5.2% and +160bp for FY09.

No change in FY09 guidance might come as a slight disappointment; however, company says that it wanted to focus people more on medium-term targets and not lots of ST new info.

2. Defence – Improved medium-term targets

Re the defence. Rejects Kraft offer as inadequate. Says revised medium-term plans given momentum are:

Ø Organic sales growth in the 5-7% range (was 4-6%). NE was 4.7% CAGR 2010 – 2013
Ø Margins 16%-18% by 2013 (previous 2011 “mid teens”). Compares with c. 15%+ in 2011 implied. NE was 15.8% 2011 and then c. 16.2% ongoing
Ø 80-90% cash conversion – implies better NWC management from here. 2009 FCF conversion c. 50%
Ø DD dividend growth from 2010 (in NE est, 2010E 19.5p)

Broadly, if we run 6% sales growth and margins at 18% by 2013, we would increase PT from 780p to c. 910p all else equal.

Sales growth increase driven by;

– Higher proportion of emerging markets (currently 38% of sales) in the mix and growing more quickly (was +12% in 2008)
– Absence of portfolio rationalisation (2007-2009 sales growth 6% with this offset)
– More mix and innovation in developed markets. More selective about growth projects.

Margins from ongoing initiatives, no new major restructuring. Says will take c. 70-80bp of ongoing restructuring charges (within margin guidance), ie c. £50m per annum. (£180m restructure costs in 2009).

Says that the cash conversion will be from the absence of big restructuring outflows and NWC management post the reconfiguration of plants.

Following press speculation yesterday, the Board of Mouchel Group plc (“the Company”) confirms that it has been in receipt of two unsolicited approaches from VT Group plc to acquire the entire issued and to be issued share capital of the Company.

The Board believes these approaches to be wholly inadequate and at a level which substantially undervalues the Company.

The Board has discussed these approaches with its advisors and has unanimously rejected them.

The Board understands that VT Group plc remains interested in pursuing a transaction.