Cadbury to Spin Off, Not Sell, U.S. Drinks Unit

Cadbury Schweppes plc says it now plans to spin off its U.S. drinks unit through a share issue to shareholders via a listing on the NYSE, not to be completed before Q2 2008. Cadbury had put the unit up for sale in March, and had strong interest from private equity firms, but deteriorating credit markets over the summer hindered progress towards a sale. A Bear Stearns analyst said the spin off decision is "ultimately disappointing," since investors expected Cadbury to make up to £7 billion from the sale. The analyst added that Cadbury will "struggle to defend its current premium." Separately, Cadbury provided a Q3 trading update, noting its confectionary business had a "particularly strong" quarter with revenues up 10%. Revenues at its Americas Beverages unit were up 3%, in what Cadbury said reflects a "challenging" quarter. In unrelated news, Hershey's Trust, which owns about 1/3 of Hershey's equity, but 2/3 of voting rights, said it is "not satisfied" with Hershey's performance. The Trust said it is "actively engaged in an ongoing process" to improve Hershey, apparently including pursuing a merger with Cadbury (full story). Ordinary shares of Cadbury were last up 0.33% to 602.50 pence in London. Cadbury's ADRs gained 0.5% to $49.26 on Tuesday.

Sources: Press release, Bloomberg, MarketWatch, Reuters
Commentary: Cadbury Rejects Private-Equity Bid -- FT • Eight Halloween Stock Tricks.... I Mean Picks • Cadbury Schweppes Leverages The Net For Product Development
Stocks/ETFs to watch: CSG. Competitors: KO, PEP, JSDA, HANS, FIZ

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