Cadbury blame credit conditions for end to soft drink sale

Cadbury Schweppes has abandoned plans to sell its North American drinks operation because the problems in the credit market make it unlikely that potential buyers will be able to raise the £7bn asking price.

Cadbury decided to sell the business, which produces brands such as Dr Pepper, Snapple and 7-Up, following pressure earlier this year from activist investors who were disappointed with the group’s performance. Originally it put a £8bn price tag on the business but reduced that as credit conditions tightened. Now it says “it does not believe current market conditions will facilitate an acceptable sale process in the foreseeable future”.

At the end of the summer holidays Cadbury received a cheeky indicative bid from a consortium headed by Blackstone, the private equity group which bought Cadbury’s European soft drinks arm for £1.3bn in February. It offered to take over the American drinks arm for between £6.4bn and £6.9bn, but only if Cadbury itself would underwrite the deal. In effect, the company was being asked to part finance the takeover and so rejected the overture.

The plan is now to rename the North American drinks operation as Americas Beverages and list it as a separate company on the New York Stock Exchange in the middle of next year. Initially, the shares will be offered to existing shareholders in Cadbury Schweppes. The company says this course of action is now the best way to maximise shareholder value.

© Ron Emler, db 10 October 2007