LONDON -- Cadbury Schweppes PLC said it is strongly considering plans to split itself in two, separating its confectionery and soft drinks businesses, apparently bowing to pressure from investors led by U.S. billionaire Nelson Peltz, said the Associated Press. Cadbury said it was still evaluating the options for the split and would provide further information in a mid-June trading update.
The company intends to spin off its Plano, Texas-based U.S. beverages armwhich makes products including Dr Pepper, 7 UP, Sunkist and A&W, as well as Snapple, Mott's, [image-nocss] Hawaiian Punch and Clamatofrom the rest of Cadbury, leaving its confectionery business, which has products such as Dairy Milk chocolate and Trident Gum.
Peltz has a record as a shareholder activist, buying up stock in companies he sees as undervalued then agitating for change from within. Analysts speculated earlier this week that he had such a plan for Cadbury, where he advocated splitting the confectionery and soft drinks business.
Cadbury CEO Todd Stitzer said that Thursday's announcement was the culmination of a process that's extended over two-to-three years, but he also acknowledged that recent press speculation about Peltz's intentions had influenced the timing of the announcement. Certainly the market speculation accelerated a final decision, he said.
Peltz's Trian Fund Management LC, New York,issued a statement: "Trian congratulates the management team and board of Cadbury Schweppes for their shareholder-focused approach. Under Todd Stitzer's leadership, the company has successfully built two strong businesses with the size and scale to thrive independently. Upon completion of a separation, we believe that both businesses will be better positioned to take full advantage of their world-class brands for the benefit of shareholders."
The company had been under increasing pressure to revert to its origins as a confectionery company by spinning off the U.S. drinks business, particularly since it sold its European soft drink unit to a private equity consortium in 2005.
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, Stitzer said in a statement.
Click here to read the complete statement, which offers a detailed strategic analysis for the split.
Cadbury's confectionery business account for around 60% of the group's revenue, with beverages accounting for the remaining 40%.
Despite repeated comments by management that confectionery and beverages fitted, the status quo looks to have been taken out of their hands, said Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers. In the end, it looks as though market forces have won the day and valuation considerations have triumphed over distribution synergies.
Stitzer, who ran the beverages business himself in the late 1990s, said the company had received no approaches yet for either business. He added that he had no intention of leaving Cadbury after the split and was confident the confectionery company will remain independent, despite suggestions that it would be exposed to a bid as a standalone company.
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