Investment: Cadbury weighs up acquisition or payout
Thursday 25 February 1999
Cadbury is set to receive pounds 1.1bn from the sale of its non-US soft drinks brands to Coca-Cola - should the deal be approved by the regulatory authorities - and will dispose of pounds 500m of bottling assets.
Announcing an 11 per cent rise in underlying full-year profits to pounds 609m, John Sunderland, chief executive, said he would like to expand the group's confectionery operations with a deal but denied the company had looked at Hershey, the US chocolate giant.
"I saw the speculation but it is news to me. We have not held talks," he said.
However, analysts say a deal with Hershey would have compelling commercial logic. Cadbury Schweppes admits its balance sheet is underleveraged and one of its stated aims is to be a global player in the confectionery market.
Hershey is a huge player in the US and Canada but has little else in other markets. Cadbury, on the other hand, is dominant in Britain and has operations in Canada and emerging markets but virtually no representation in the US, the world's largest confectionery market.
Although the Hershey foundation controls a major stake in Hershey it would prove a more accessible target than Mars, the privately controlled group which is the only other major US confectionery company.
Buying anything else would make little sense as the Cadbury brand is licensed to Hershey in perpetuity in a deal only the American company can change.
A merger of the Hershey and Cadbury chocolate operations could provide a solution and the lack of a share buy-back yesterday could suggest the company is keeping its powder dry for a move later this year.
One analyst said: "They would like to expand their chocolate business but they have the same problems as Unilever, prices are just too high. If nothing changes the money will be coming back to shareholders."
That would please investors who have seen Cadbury's shares outperform the market by 48 per cent in the last two years.
Elsewhere the business has performed solidly in the face of difficult markets, particularly in Russia where Cadbury has been forced to write down the value of its assets by pounds 68m. Losses there have been held at pounds 16m although there is no sign of a recovery.
In soft drinks, Dr Pepper is outperforming the market but Seven-Up is still losing volume.
New bottling agreements should ensure the brands enjoy quality distribution, the company says.
On full year forecasts of pounds 660m Cadbury Schweppes shares - down 34.5p at 1000p - trade on a forward rating of 24, which appears well up with events.
As one analyst says: "The shares have had a good run and it is difficult to see them making much progress in the short term."
- 1 National Orgasm Day: Six reasons (plus one bogus one) why they're good for us
- 2 The 'world's most beautiful vagina' has been debunked by science
- 3 Whoopi Goldberg tells Cara Delevingne to suck it up: 'She's not famous. I'M famous'
- 4 John Green schools morning show hosts after awkward interview with Cara Delevingne
- 5 Doctor Who: Christopher Eccleston says why he left the BBC series after just one series
What turns someone into a conspiracy theorist? Study to look at why some are more 'receptive' to such theories
Whoopi Goldberg tells Cara Delevingne to suck it up: 'She's not famous. I'M famous'
John Green schools morning show hosts after awkward interview with Cara Delevingne
Supermodel Gisele Bundchen mocked for wearing a burka to avoid being seen visiting plastic surgeon in Paris
'Rowdy' Roddy Piper dies: Wrestling legend dies aged 61, according to reports
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn – or a return to a Labour government
Labour leadership contender Jeremy Corbyn says 'we can learn a great deal from Karl Marx'
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Public anger after French sunbather beaten up by gang for wearing a bikini in Reims park
Calais Migrant Crisis: Deputy Mayor of Calais labels Cameron's use of 'swarm' as 'racist' and 'ignorant'
Labour leadership: New poll shows party is now even 'less electable' than under Ed Miliband
iJobs Money & Business
£13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...
£22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...
£35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...
£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...