IRS confirms tax-free status of Kraft spinoff stock

Kraft Foods Inc. said the U.S. Internal Revenue Service has provided a favorable private letter ruling confirming the tax-free status of the planned spin off of the company's North American grocery business and certain related internal reorganization transactions.

Following the transaction, the North American grocery business will be an independent, public company operating as Kraft Foods Group, Inc.

“This favorable tax ruling from the IRS is a significant milestone in the spin off process,” said Dave Brearton, Kraft executive vice president and chief financial officer. “We remain firmly on-track to launch two industry-leading companies before the end of 2012.”

Based on certain facts, assumptions, representations and undertakings set forth in the ruling, for U.S. federal income tax purposes, the distribution of Northfield-based Kraft Foods Group, Inc. common stock generally will not be taxable to Kraft Foods Inc. or to U.S. holders of Kraft Foods Inc. common stock, except in respect to cash received in lieu of fractional share interests, which generally will be taxable to the holders as capital gain.

The spin off is subject to a number of conditions, including the continued validity of the private letter ruling from the IRS, the effectiveness of Kraft Foods Group's Registration Statement on Form 10 that was filed with the U.S. Securities and Exchange Commission, as amended, the execution of inter-company agreements related to the spin off and final approval from the Kraft Foods Inc. Board of Directors.