Cadbury Schweppes Americas Beverages Spins Off

Acceptable sale was "unlikely," Sunderland said

PLANO, Texas -- Cadbury Schweppes Americas Beverages will become an independent company following its spinoff, rather than sale, from candy company Cadbury Schweppes plc.

The announcement Wednesday came as the candy maker announced a 10% rise in sales in its confectionary division, which makes Dairy Milk chocolate and Trident chewing gum, said the Associated Press.

Cadbury said it would list the business as a separate company on the New York Stock Exchange through a share issue to existing shareholders. It does not expect to complete [image-nocss] the separation before second-quarter 2008. Terms were not disclosed.

The future of the U.S. drinks business has been up in the air since earlier this year, when Cadbury Schweppes came under pressure from investors led by U.S. billionaire Nelson Peltz to separate its beverage and candy arms.

The company subsequently announced a "twin-track" process in March to determine whether to sell or separate the unit, which generates more than 80% of its revenues and profits in the United States. It had been leaning toward a sale but indicated in August that a spinoff was the more likely option because of turbulent debt markets.

"With an acceptable sale unlikely in the foreseeable future, the board believes it is prudent now to focus on de-merging our Americas beverages business," chairman John Sunderland said Wednesday.

The announcement coincided with a Wall Street Journal report on Wednesday, citing unidentified sources, that representatives of Hershey Trust, the charitable group that controls The Hershey Co., met with Cadbury in early September to discuss a merger, and asked whether a deal could maintain the trust's controlling stake in Hershey.

Analysts have speculated that Hershey Co., the largest U.S. candymaker, wants to buy some or all of Cadbury's chocolate and gum lines. In April, Stitzer said that a combination of some of the two companies' businesses would make sense.

On another potential deal, Cadbury plc CEO Todd Stitzer said Tuesday that Cadbury had no interest in buying Godiva, the premium chocolate business of Campbell Soup Co., and would instead concentrate on expanding its own Green & Black's premium brand. "We've got no plans to acquire smaller premium brands at this point," he said.

Campbell has been divesting noncore units and last month confirmed it is exploring the possible sale of its Godiva chocolate brand.

The company said that Stitzer will remain as CEO of Cadbury PLC with Ken Hanna as CFO. Ahead of the separation, Cadbury Schweppes Americas Beverages president and CEO Gil Cassagne has decided to resign for personal reasons to pursue other interests.

The beverage business will be led by Larry Young, currently CEO of the bottling operation and formerly president and COO of Pepsi-Cola General Bottlers. John Stewart will continue as CFO.

The restructuring will lead to 470 job losses, the company said.

Young most recently served as president and COO at Cadbury Schweppes Bottling Group, a division of Cadbury Schweppes Americas Beverages. He joined Cadbury in April 2006 through the company's full acquisition of the Dr Pepper/Seven Up Bottling Group (DPSUBG), where he had been president and CEO since 2005. Since that time, he has played a central role in helping to create a new business model, with CSAB and the bottling group merging to become one integrated beverage company. Prior to joining the bottling group, Young served more than 25 years at Pepsi. In a career spanning more than 30 years and several continents, he has produced and sold virtually every type of beverage, from soft drinks and tea to milk, water and juice.

Cadbury Schweppes Americas Beverages is a leading manufacturer and distributor of flavored carbonated beverages, including Dr Pepper, 7UP, A&W and Canada Dry. The company's noncarbonated brands include Snapple, Mott's and Hawaiian Punch.

In addition, Cadbury Schweppes Americas Beverages' own fully integrated bottling business enables it to control its distribution network and route to market. This business contributed around 30% of Cadbury Schweppes Americas Beverages' revenues in 2006. The majority of the bottling group's revenues come from the bottling and distribution of Americas Beverages' own brands.

The Plano, Texas-based business operates in the United States, Canada, Mexico and the Caribbean, with more than 80% of revenues coming from the United States.

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