Kraft Foods' announcement that it will acquire the Iberian-based operations of United Biscuits (UB) and certain Nabisco trademark rights for US$1.07bn has not affected its ratings with agency Fitch.

The Ratings agency estimates negligible impact on Kraft's leverage, which remains at 1.9 times total debt-EBITDA.

The agency said that Kraft has struggled with changing consumer requirements, a consolidating retail trade and an unfavourable commodity environment, which has placed pressure on the company's operating margins.

However, Fitch also noted that Kraft is addressing these issues with product innovations, greater investments in advertising, marketing and promotion, and an aggressive $3.7bn restructuring programme to reduce its cost structure and is also selling non-core brands, such as the recently completed divestiture of Milk Bone for $580m.

"The company also has new management with a newly appointed CEO. Despite recent flux, Kraft still has strong liquidity and financial flexibility," Fitch stated.

The UB acquisitions will be financed with $522m from the redemption of Kraft's outstanding investment in UB, primarily deep discount securities, and $548m of assumed debt. Kraft will incur a pre-tax gain of approximately $243m from the redemption of the UB securities. Kraft's total debt as of 31 March 2006 was $11.3bn.

The acquired Iberian-based businesses generated $400m of net revenues in 2005 and the deal, which includes seven manufacturing facilities and 1,300 employees, is expected to close in the third quarter.