UK: Cadbury Schweppes: buy gum (COMMENT)
The deadline for first-round bids in healthcare giant Pfizer's sale of its Adams subsidiary was expected to be this week, but has now been extended until next month. Cadbury Schweppes looks like being the winner: although Pfizer is stalling the sale in the hope of attracting new bidders, they seem unlikely to materialise.
Cadbury Schweppes could be in the leading position in the race to acquire Adams. Pfizer acquired the chewing gum manufacturer in 2000 through its merger with Warner-Lambert. Amongst Adams' brands are Dentyne chewing gum and Halls throat pastilles. Pfizer always intended to sell Adams, but it is keen to offload the business in one piece rather than break up the company. This means that the number of potential bidders is reduced, as most of those interested do not wish to acquire the whole company.
The Adams company has attracted the attentions of Cadbury Schweppes, PepsiCo, Colgate-Palmolive and of course Nestlé. However, only Cadbury Schweppes wishes to acquire the whole of Adams, which suggests that it is now the leading bidder. Cadbury Schweppes recently made a joint bid for the chocolate manufacturer Hershey, which was unsuccessful. As usual, Nestlé declined to comment on the Adams auction.
Cadbury Schweppes wishes to build a confectionery business in the US, as its portfolio of products in the US currently focuses on soft drinks, such as Dr Pepper and 7UP. Although it can afford the £2.6bn (US$4.0bn) that Pfizer is asking, it would be the company's largest acquisition to date.
The first set of bids were due this week, but in a move that suggests that Pfizer is still trying to attract more bidders, the deadline has been extended well into November. Other potential bidders were Kraft and Wrigley. However, Pfizer is likely to let Adams go down the Cadbury alley, as Kraft does not wish to enter the chewing gum market, and Wrigley would be forbidden from buying anything but the medicated sweets section of Adams, as it is already the world's leading gum manufacturer.
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