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June 19, 2007

UPDATE: UK: Reshaped Cadbury eyes bolt-on acquisitions

Cadbury Schweppes chief executive Todd Stitzer has hinted that the company would steer clear of bidding for rival Hershey once it becomes a pure confectionery business. Stitzer (pictured) was speaking today (19 June) in London as Cadbury outlined plans to reshape its business after the sale or demerger of its US drinks operations.

Cadbury Schweppes chief executive Todd Stitzer has hinted that the company would steer clear of bidding for rival Hershey once it becomes a pure confectionery business.

Stitzer (pictured) was speaking today (19 June) in London as Cadbury outlined plans to reshape its business after the sale or demerger of its US drinks operations.

Cadbury, which this morning outlined a raft of cost cuts that would see 15% of the company’s workforce losing their jobs, is looking to boost margins as it focuses solely on chocolate, gum and candy.

Industry watchers have speculated that Cadbury could bid for Hershey once it sheds its drinks business. Cadbury made a move for the US confectionery group in 2002 but the bid collapsed.

Stitzer refused to comment directly on Hershey but hinted that Cadbury would look at smaller acquisition targets. As a pure confectionery player, Cadbury would have a war chest of GBP500m-1bn (US$994m-1.9bn), Stitzer said.

“That would be enough to make a medium-sized bolt-on acquisition once every 15 months. The opportunity is significant; the global confectionery market remains highly fragmented,” Stizter said.

When asked whether Cadbury would be interested in making a bid for Hershey, he added: “We are focusing on organic revenue growth, cost reductions and targeted bolt-on acquisitions. It’s a strategy that’s fared us well in the last three years and that’s what we’re going to focus on now.”

The company, which is to be renamed Cadbury plc, said its cost-cutting programme would lead to a restructuring charge of around GBP450m and confirmed plans to run itself under four geographic divisions.

Cadbury has a raft of plans designed to cut costs. CFO Ken Hanna said the company had become “commercially complex”, is “under-performing” in certain markets and had a “relatively complex” supply chain. Hanna said a key task would be to scale back the proliferation of SKUs that Cadbury had developed in recent years.

Both Hanna and Stitzer declined to comment on where the job cuts would be made, or on the impact the restructuring could have the company’s base in the UK.

Stitzer said: “The heart of Cadbury will continue to be in Bournville. The purple flag will continue to fly over those buildings.”

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