Cadbury’s disappoints investors

Cadbury Schweppes will not return money to shareholders this year either via special dividend or share buy-back, following turmoil in the debt markets. This will disappoint investors who were told the company would be able to return capital once it had demerged its beverages arm.

Although Cadbury has not ruled out selling the unit to a private equity company if the debt markets recover, it intends to proceed with a flotation. The newly named Dr Pepper Snapple Group, currently valued at £6.5bn-£7bn, is due to list on the New York stock exchange later this year.
The company had originally considered listing the arm with a below-investment grade rating, which would have allowed it to take on more debt and return money to shareholders. But the rising cost of securing debt financing has made this impossible. The business will now target a low investment-grade credit rating of BBB.

Fionnuala Synnott, 20/2/08