TORONTO, Dec 27, 2005 (BUSINESS WIRE) -- Kraft Canada Inc. announced today that it has reached an agreement to sell certain Canadian grocery assets to a new company, owned by affiliates of Sun Capital Partners, Inc. and EG Capital Group, LLC, expected to be named CanGro Foods. The proposed sale includes Aylmer tomatoes, vegetables, fruits, soup and beans; Primo pasta, sauce, soup, tomatoes, beans and other products; Ideal vegetables; Il Migliore and Roma foodservice pasta; and the Canadian licensing rights for a number of Del Monte products, including canned fruits and vegetables. Kraft will retain the rights to the Del Monte line of beverages in Canada. The Company estimates that the products included in the transaction will generate net revenues of approximately $300 million Cdn in 2005.

"We continue to transform our portfolio as part of our Sustainable Growth Plan by focusing on core global and regional businesses where we can achieve and maintain a competitive advantage," said Dino Bianco, President, Kraft Canada. "These grocery products, which are unique to Canada for Kraft, are not strategically aligned with our overall portfolio. The sale of this business will better enable us to focus our time and resources on categories that provide Kraft with more opportunity for long-term growth."

The sale includes five manufacturing facilities -- four in Ontario in St. David's, Dresden, Exeter and Toronto, and one in Chambly, Quebec - as well as product inventories and other related manufacturing assets.

Approximately 800 Kraft Canada employees, most in manufacturing positions, are expected to transfer to CanGro as part of the sale. Kraft will also continue to provide information technology, procurement and other support services during a transition period.

Kraft Foods Inc., US-based parent of Kraft Canada, will recognize an impairment charge of approximately $.05 per share in Q4 for this agreement. The sale of these businesses, which is expected to be completed by the end of the first quarter of 2006, will not materially affect the operating income of Kraft Canada in the future.

Kraft Foods markets many of the world's leading food brands, including Kraft cheese, Maxwell House and Jacobs coffees, Nabisco cookies and crackers, Philadelphia cream cheese, Oscar Mayer meats, Post cereals and Milka chocolates, in more than 155 countries.

Sun Capital Partners, Inc. is a leading private investment firm focused on leveraged buyouts, equity, debt, and other investments in market-leading companies that can benefit from its in-house operating professionals and experience. Sun Capital affiliates have invested in and managed more than 100 companies worldwide since Sun Capital's inception in 1995 with combined sales in excess of $23.0 billion. Sun Capital has offices in Boca Raton, Los Angeles, New York, and London.

EG Capital Group, LLC is a New York based private equity firm focused on buy-outs of, and growth capital for, established businesses in Canada and the United States. EG Capital is actively pursuing opportunities in the consumer products and retail sectors. Recently, EG Capital acquired Laura Secord, the largest boxed chocolate retailer in Canada. EG Capital takes an active, hands-on investment approach, leveraging its strategic relationships with customers, potential partners and operating professionals to add significant value to its companies.

For more information on Kraft Foods, please visit our website at www.kraft.com.

Forward-Looking and Cautionary Statements

This press release contains projections of future results and other forward-looking statements. One can identify these forward-looking statements by use of words such as "strategy," "expects," "plans," "anticipates," "believes," "will," "continues," "estimates," "intends," "projects," "goals," "targets" and other words of similar meaning. One can also identify them by the fact that they do not relate strictly to historical or current facts. These statements are based on the company's assumptions and estimates and are subject to risks and uncertainties. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the company is hereby identifying important factors that could cause actual results and outcomes to differ materially from those contained in any forward-looking statement made by or on behalf of the company; any such statement is qualified by reference to the following cautionary statements.

Each of the company's segments is subject to intense competition, changes in consumer preferences and demand for its products, including diet trends, the effects of changing prices for its raw materials and local economic and market conditions. Their results are dependent upon their continued ability to promote brand equity successfully, to anticipate and respond to new consumer trends, to develop new products and markets, to broaden brand portfolios, to compete effectively with lower priced products in a consolidating environment at the retail and manufacturing levels and to improve productivity. The company's results are also dependent on its ability to consummate and successfully integrate acquisitions and to realize the cost savings and improved asset utilization contemplated by its restructuring program. The company may, from time to time, divest businesses that are less of a strategic fit within its portfolio, and its results may be impacted by either the gains or losses, or lost operating income, from the sales of those businesses. In addition, the company is subject to the effects of foreign economies, changes in tax requirements, currency movements, fluctuations in levels of customer inventories and credit and other business risks related to its customers operating in a challenging economic and competitive environment. The company's results are affected by its access to credit markets, borrowing costs and credit ratings, which may in turn be influenced by the credit ratings of Altria Group, Inc. The company's benefit expense is subject to the investment performance of pension plan assets, interest rates and cost increases for medical benefits offered to employees and retirees. The company's assessment of the fair value of its operations for purposes of assessing impairment of goodwill and intangibles is based on discounting projections of future cash flows and is affected by the interest rate market and general economic and market conditions. The food industry continues to be subject to recalls if products become adulterated or misbranded, liability if product consumption causes injury, ingredient disclosure and labeling laws and regulations and the possibility that consumers could lose confidence in the safety and quality of certain food products. The food industry is also subject to consumer concerns regarding genetically modified organisms and the health implications of obesity and trans-fatty acids. Developments in any of these areas could cause the company's results to differ materially from results that have been or may be projected by or on behalf of the company. The company cautions that the foregoing list of important factors is not exclusive. Any forward-looking statements in this press release are made as of the date hereof. The company does not undertake to update any forward-looking statement.

SOURCE: Kraft Canada Inc.

Kraft Canada Inc.
Susan Davison (Media), 416-441-5340
susan.davison@kraft.com
or
Don Blair (Media), 416-441-5610
don.blair@kraft.com
or
Mark Magnesen (Investor Relations), 847-646-3194
mmagnesen@kraft.com