Cadbury Schweppes revealed today (15 March) that it intends to separate its confectionery and Americas Beverages businesses. The board, Cadbury said, is currently evaluating the options for separation to maximise shareholder value.
The decision was announced a day after it was revealed that activist investor Nelson Peltz had amassed a 2.98% stake in the company, becoming Cadbury’s fourth-largest shareholder.
Rumours that increased pressure from stakeholders meant a break-up of the group was imminent sent share prices climbing from an opening value of 590 pence to close at 602 pence yesterday. In morning trade today, shares continued to rise, increasing by 3.82% to reach 625 pence at 9.30am (GMT).
In a statement released this morning, the Cadbury board said that the move was not a sudden one: “The board has continued to keep the position of the beverage business under review.” The group’s drinks business, which makes Dr Pepper and 7-UP, posted sales of GBP1.8bn (US$3.4bn) last year, an increase of 44% as Cadbury acquired bottlers to improve distribution in the US.
“This decision is of great significance for the board and the company. It has been facilitated by acquisitions and disposals over the last decade designed to create a strong and potentially independent Americas Beverages business. In the same time, we have built the world’s largest confectionery business. We believe now is the moment to separate and give both management teams the focused opportunity to extract the full potential inherent in these excellent businesses,” Sir John Sunderland, Cadbury chairman commented.
Expounding on the strategic rationale behind the move, Cadbury said that it stemmed from its ‘Managing for Value’ philosophy, adopted in 1997. In order to deliver superior shareholder returns, Cadbury said it has strengthened both its confectionery and beverages portfolio through acquisitions, disposals and organic investment, to the point where the company now believes each business will operate more effectively on a stand-alone basis.
“Separating these two great businesses will enable two outstanding management teams to focus on generating further revenue growth, increasing margin, and enhancing returns for their respective shareowners,” Todd Stitzer, CEO, said.
Cadbury will provide more details on its plans to develop the confectionery business and the separation of the Americas Beverages unit when it delivers a trading update on 19 June.