Cadbury’s demerger on track

Cadbury Schweppes has managed to raise £1.9 billion of debt financing in order to complete the demerger of its beverages arm, despite difficult credit conditions. This is a significant achievement as some doubted that the demerger would ever go ahead because of the ongoing credit crisis.

The company has already signed definitive credit agreements even though the company is not scheduled to spin-off its beverages arm for another two months. This unusual decision was taken to reassure investors that it could secure debt financing in difficult times. This strategy appears to have worked as the price of Cadbury Schwppes’ shares rose by 4% yesterday.

Cadbury’s has told investors that it will not be issuing a regular dividend for the new company, Dr Pepper Snapple Group, but investors and analysts alike appear to think this is a sensible move as it means that Cadbury will be able to repay its debt quicker.

The demerger is scheduled to complete in early May on the New York Stock Exchange, as long as shareholders approve it next month. JP Morgan Chase, Bank of America, Goldman Sachs, Morgan Stanley and UBS supplied the debt.

Fionnuala Synnott, 12/03/08