LONDON -- Are some of the largest candy and snacks companies in the country preparing to join the beverage race soon? Quite possibly, according to reports from Citigroup Inc. and The Wall Street Journal.
The two sources report the likely purchasers of Cadbury Schweppes PLC, which is reportedly courting buyers, to be Hershey Foods Corp., Nestl a SA and Kraft Foods Inc. Each companycould be a logical partner for Cadbury, reported the Journal.
Shares of Cadbury Schweppes PLC shot up in heavy trading this week, amid talks that the [image-nocss] candy and soft-drinks maker seems primed as a takeover target, according to the report. Citigroup Inc., New York, helped to stoke the talk, which has percolated before, with a report on Tuesday naming Hershey Foods as a possible bidder.
Cadbury is an attractive target, the newspaper reported, because its chief executive has turned around the once-sleepy British candy company in recent years, focusing on products with higher sales growth. Also, the food industry as a whole is seen as ripe for consolidation.
The only problem, however, is the buyers. Each of the three likely candidates faces a hurdle that would complicate any deal or make a deal unlikely soon, the Journal reported. Hershey has an intricate ownership structure, Nestl a would face antitrust problems, and Kraft is waiting to be spun off from its parent Altria Group Inc. Also, any of the potential buyers would have to decide what to do with Cadbury's large U.S. soft-drinks portfolio, which includes Dr Pepper and 7-UP, among other beverages.
Cadbury is the world's largest candy company by sales and the No. 3 soft-drinks group in the United States. The London-based company had 2004 sales of $11.7 billion.
Hershey has said it could be looking for acquisitions. Hershey's U.S.-focused chocolate business would fit nicely with Cadbury's global gum business and its European and emerging-markets chocolate brands, the paper stated. But Hershey is controlled by a trust. Several years ago, Cadbury tendered a joint bid with Nestl a to buy Hershey that the Hershey trust voted to reject.
But, even if the trust supported a deal, the size of Cadbury could be prohibitive and Hershey wouldn't want its drinks business, people familiar with Hershey's strategy told the Journal. Nestl a, the world's largest food company by sales, is an unlikely buyer because its own chocolate business would create antitrust problems in a number of countries, including the United Kingdom, France, Australia and Canada. Kraft does not plan to make any big acquisition moves before it is spun off from its parent, which is expected sometime later this year.Cadbury's decision last year to sell its European soft-drinks business reignited talk that the company could also shed its U.S. drinks brands. But Cadbury chief executive Todd Stitzer has told analysts and investors in recent months that he has no plans to sell the soft-drinks business and expects that Cadbury will remain independent for the next several years.
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