Cadbury Schweppes has insisted it will still be able to drive growth from its confectionery business, even if concerns over debt markets prevent a sale of its US drinks arm.
Cadbury, the world’s largest confectioner, is looking to separate the drinks business from its core chocolate, candy and gum operations and had earmarked a possible sale, valued by analysts at around US$7bn.
However, Cadbury has delayed the sale process due to what it describes as “volatility” in debt markets, sparking speculation that the company could instead de-merge the drinks operations.
The separation is a precursor to Cadbury’s strategy of reshaping and reviving its confectionery business and industry watchers had expressed concern that a de-merger would hamper the company’s revamp.
Cadbury CFO Ken Hanna insisted the company’s programme would go-ahead as planned, whether the drinks arm was sold or de-merged.
“If we sell, we’ve said we will give the money back to shareholders. Shareholders will get a special dividend or cash. If we demerge the business, they will get shares in an Americas Beverages company that they can sell if they want to,” Hanna said in London today (1 August). “It doesn’t affect the flexibility of Cadbury or our strategy at all.”
Hanna and Cadbury CEO Todd Stitzer refused to set out a timetable for the separation of the drinks unit, which makes brands including Snapple and Dr. Pepper. Hanna said “shareholder value” would decide whether to sell or de-merge the business.
Two private equity consortiums are said to be the front-runners to buy the drinks arm, although Hanna and Stitzer declined to comment on the identity of the bidders. Concerns over debt markets have made it difficult for the bidders to so far raise the cash to buy the business.
Earlier today, Cadbury reported a decline in first-half earnings as increased investment and rising costs weighed on margins.
The company posted underlying pre-tax profits of GBP110m (US$222m) for the six months to the end of June, compared to GBP123m a year earlier.