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“standfirst”>Schweppes to divest beverages business, Cadbury schweppes is separating its Americas beverages and confectionery businesses…E&T rejects Yarraman takeover bid, Evans & Tate has rejected Yarraman’s takeover bid after due diligence revealed that the…
Schweppes to divest beverages business
Cadbury schweppes is separating its Americas beverages and confectionery businesses in a bid to maximise shareholder value. Company chairman, Sir John Sunderland said the time was right to “exact the full potential inherent” to both businesses. The Americas Beverages business has strengthened its route to market by acquiring several of its third party bottlers, including the Dr Pepper/7 Up Bottling Group. The company has made a number of acquisitions and disposals. In 2006, Cadbury Schweppes sold its beverages operations in Europe, Syria and South Africa for £1.4 billion.Cadbury Schweppes has been the source of takeover speculation of late. This was heightened when it was revealed that a hedge fund had taken nearly 3% of the company’s equity. Trian Funds, a US hedge fund founded by Nelson Peltz, purchased 62,465,267 Cadbury Schweppes shares, driving the company’s share price up by over 10% on the day of the sale.
Over the past year Cadbury Schweppes shares had fallen by 3% as concern grew over the company’s long-term profitability. The management abandoned its annual profit targets last year. Due to the complexity of a demerger, it is likely that the company will look to sell its beverages business, but it could also become a takeover target, particularly for private equity investors. The company, which owns the Dr Pepper, 7 Up and Snapple brands, is the third most successful soft drinks company after Coke and Pepsi. More information will be available on 19 June, when the company announces its trading update.
E&T rejects Yarraman takeover bid
Evans & Tate has rejected Yarraman’s takeover bid after due diligence revealed that the winery had insufficient debt and equity to complete the deal. In an announcement to the Australian Stock Exchange, the Margaret River-based company said it was terminating its agreement to merge with Yarraman, which is based in the Hunter Valley. Yarraman, however, remains committed to the merger proposal.
Yarraman’s offer values Evans & Tate at A$148.3m. The latest financial results for Evans & Tate show that the company’s debts exceed its assets by A$74.4 million. Yarraman claims that the financial backing that it has secured from General Electric will cover these debts and will submit its final offer in due course.
Brown-Forman earnings decline
brown-forman saw its earnings per share for the quarter ending 31 January drop 8% compared to the same period last year. According to the corporation, this decline was due to the absence of share benefits associated with changes in its Australian distribution JV as well as the share gains derived from the sale of winery property in the previous year. Q3 revenues grew by 20% to US$755 million while gross profit grew 17% to US$387m with all of the company’s premium brands including Jack Daniel’s, Southern Comfort, Finlandia and Jack Daniel’s & Cola, generating profit growth. Year-to-date growth was also driven by a weak US dollar.
soft drinks grow
The UK soft drinks category is now worth £8.3 billion, according to this year’s Britvic Soft Drinks Report. Since 2001, UK per capita consumption has risen by 22% to 251 litres. Apart from the hot summer of 2003, this is the industry’s highest growth level in six years. Health concerns continue to influence customer choice with UK consumers buying more diet drinks and preferring still over carbonated drinks. But, despite increased health awareness, the bottled water category still only accounts for around 20% of total soft drinks volume in the UK. “This is in contrast to all other European countries where volume is over 50%, which demonstrates the scale of opportunity for growth of the category domestically,” said Andrew Richards, sales director at Britvic.
Off-trade sales of soft drinks have grown 44% since 2001, making them the largest grocery category at £5.9bn. On-trade value sales grew by 5% to £2.4bn, putting soft drinks just after spirits in value.
The mighty are falling
Big hitters see their share prices drop as market loses confidence
This month’s index shows the relative weakness of the major industry players with wine giant Constellation Brands’ share price dropping by a mammoth 31.54%. The drop followed the company’s warning of the challenges facing the wine industry last month. Constellation said it expects to see its net sales fall by 12-14% in 2008 as competitive pricing in the UK, the Australian wine glut and the company’s decision to cut its US wine inventories take their toll.Even C&C Group, author of the Magners success story, saw its share price drop by nearly 20% as it announced that sales volumes of Magners in the second half of the past financial year were below market expectations. C&C also said that EBITDA in 2008 would rise by 15-25% instead of the 25-30% hoped for by the market.Pernod Ricard‘s share price fell by nearly 10% despite upping its sales forecast earlier in the quarter following positive results.The loss of market confidence appears to have been triggered by an underperforming wine business and a fear that the company is currently overvalued. Foster’s Group’s share price remained more or less static as first-half earnings, which were below market expectation, were counterbalanced by takeover speculation.
In this month’s graph, the MSCI Emerging Markets Index outperforms the other indices following a sharp dip in February.
© db April 2007