Cadbury pulls drinks auction
Cadbury Schweppes ditched the sale of its American drinks arm today after admitting it was unlikely to achieve an acceptable price in current market conditions.
The confectionery giant will now dispose of the 7Up and Dr Pepper business through a listing on the New York Stock Exchange.
The update came as Cadbury said its chocolate business in Britain had enjoyed a “particularly good quarter”, with the operation benefiting from a strong recovery from last year’s product recall and a cooler summer.
Worldwide confectionery sales for the third quarter of the year were up 10%, bringing year-to-date revenues growth to 7%. As well as improved results from chocolate, Cadbury said it had seen another ``excellent performance'' from its gum business, which includes the brands Trident and Dentyne.
Cadbury also said it had taken steps to improve profit margins, with the announcement of 2,500 job cuts in confectionery since June. Proposals include the closure of a factory in Keynsham with the loss of around 500 jobs.
The company is under pressure from investors to improve its margins performance after missing its profit targets last year. Shares also took a battering in August after Cadbury revealed it did not expect margins to grow this year.
In July, Cadbury extended the timetable for the sale of its American drinks business in an effort to allow bidders to complete their proposals against a more stable debt financing environment.
However, Cadbury said conditions have remained difficult and were unlikely to facilitate an “acceptable sale process” in the foreseeable future.
The business, which generates more than 80% of its revenues and profits in the United States, had been seen as a private equity target with a possible price tag of between $14bn and $16bn.
Cadbury will now run create two separate businesses of Cadbury chocolate and the American drinks business, but warned that the demerger was unlikely to be completed before the second quarter of 2008.
