UK food and beverages company Cadbury Schweppes has agreed to buy US chewing company Adams from Pfizer for a total gross cash consideration of US$4.2bn, representing $3.75bn net for the base Adams business plus $450m for tax benefits.
This base valuation represents 2.0 times 2001 sales and 12.8 times 2001 underlying EBITDA. The deal will be debt financed and is expected to earn a positive return on capital in 2006 and enhance underlying earnings in 2004.
Following the acquisition, Cadbury Schweppes will become joint leader in overall confectionery and the second largest chewing gum company with a 27% market share.
The deal includes Adams’ principal brands, including Halls, Trident, Dentyne, the “Bubbas”, Clorets, Chiclets and Certs, together with other functional confectionery products, manufacturing facilities and international sales, distribution and support networks.
Adams is a branded global confectionery manufacturer with 2001 net sales of $1.9bn across 70 countries. In 2001, Adams had a 3.3% share of the total global retail confectionery market and within this 25.5% of the retail market for functional confectionery.
In total Adams has 22 factories in 19 countries, 11,586 permanent employees and a further 2,844 temporary employees spread across 40 countries. Adams has one central and ten local/regional research and development facilities.
Adams has significant market presence and operations in North, Central and South America, accounting for 75% of sales in 2001. Adams is also represented in Europe, Africa, the Middle East and Asia. It has an established presence in a number of developing markets, principally Latin America, which in aggregate accounted for around 40% of sales in 2001.
Four “power” brands represent over 70% of Adams’ sales: Halls medicated confectionery, Trident sugarfree gum, Dentyne Ice chewing gum and the Bubbas bubblegum range. Halls is the number one global sugar confectionery brand and has a significant lead over other major sugar brands. It is also the number one medicated confectionery brand with a 22% value share of the world market in 2001. Trident was the original sugarfree gum brand – it was launched in 1962 and is currently both the best selling gum and sugarfree gum in the world.
John Sunderland, CEO of Cadbury Schweppes, said, “It [Adams] brings powerful brands, access to new geographies and significant scale in the fastest growing confectionery sectors. Cost and revenue synergies, and the opportunity to drive the business within a global confectionery group, will create significant value for our shareowners.”
The acquisition is conditional on Cadbury Schweppes’ shareholder and regulatory approvals and is expected to complete by Easter 2003.