Coca-Cola, Eyeing Snapple, Approaches Bidders for Cadbury's Drinks Business

Coca-Cola is considering making a play for Snapple, the iced tea brand owned by Cadbury Schweppes, and has reportedly made contact with several private equity firms that are bidding for Cadbury's beverages unit. Coke has not approached Cadbury directly. Coke CEO E. Neville Isdell told Reuters Wednesday the company is assessing "whether it [Snapple] is of interest to us or whether we can do it on our own." An acquisition of Snapple would coincide with Coke's strategy of broadening its portfolio in the growing juice, tea and water market. Two private equity groups will be submitting second-round bids next week, and Cadbury is expected to make a selection by the end of July. Analysts are forecasting the beverages business will sell for over $10 billion. In March, Cadbury separated its beverages unit, which also includes Dr Pepper and 7 UP, from its confectionery business. The Wall Street Journal notes that a Snapple sale by a private equity buyer is by no means a certainty, since that buyer would be left with a beverages portfolio that is missing Cadbury's strongest noncarbonated brand. In February, Coke acquired Fuze Beverage LLC for approximately $250 million, and in May, it agreed to pay $4.1 billion for vitamin-enhanced water manufacturer Energy Brands Inc.

Sources: Reuters, Wall Street Journal, Bloomberg, MarketWatch, AP
Commentary: Cadbury Schweppes to Sell Beverage Unit • Private Equity Eyes Cadbury's U.S. Beverages, Shares Higher • Coca-Cola to Acquire Glaceau (Vitaminwater) for $4.1B
Stocks/ETFs to watch: The Coca-Cola Company (KO), Cadbury Schweppes plc [ADR] (CSG). Competitors: Pepsico, Inc. (PEP), Hansen Natural (HANS), Jones Soda (JSDA), National Beverage (FIZ). ETFs: iShares Dow Jones US Consumer Goods (IYK), Ultra Consumer Goods ProShares (UGE), Vanguard Consumer Staples ETF (VDC)
Conference call transcripts: Coca-Cola Q1 2007

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