Investment: Cadbury weighs up acquisition or payout

CADBURY SCHWEPPES, the confectionery and soft drinks group, said yesterday it is on the look-out for acquisitions but will return surplus capital to shareholders if no suitable targets can be found.

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."

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
Highs and lows of the cast's careers since 2004
News
news
New Articles
i100... with this review
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam