Cadbury chews over $4bn bid for US gum firm

Cadbury Schweppes, the confectionery and soft drinks group whose brands include Dairy Milk and Dr Pepper, confirmed yesterday that it would be interested in buying the Adams chewing gum business in the United States which is valued at about $4bn (£2.6bn).

The comments came as Cadbury Schweppes reported a 10 per cent increase in half-year underlying profits to £429m, helped by acquisitions and cost savings but held back by another period of tough competition against Coca-Cola and Pepsi in the US.

Adams, which includes the Dentyne and Trident brands, is expected to be put up for sale by Pfizer, the Viagra drugs group, later this year.

Cadbury, which recently bought the Danish Dandy gum business, said it would be interested in a deal which would catapult it into the number one slot on the world chewing gum market, ahead of Wrigley.

John Sunderland, Cadbury's chief executive, said: "As a leading player in confectionery you'd expect us to be interested and have a look. When information is available, we'll do that."

Mr Sunderland said chewing gum had been the fastest-growing product category in the confectionery market for the past five to 10 years.

However, some analysts cautioned that $4bn would be a high price. "It would seem a lot for a business that only makes a couple of hundred million a year in profit," one said.

Cadbury's target of double-digit earnings growth was achieved in the six months to 16 June with earnings per share up 10 per cent. But if acquisitions are stripped out, sales grew by just 3 per cent prompting concerns in the City that the business was running out of steam.

One analyst said: "Over the medium term a company cannot sustain double-digit earnings growth if the top line is not growing." Other observers said this failure to grow sales was acting as a drag on Cadbury Schweppes' stock market valuation.

Cadbury said it had good growth prospects and pointed to the performance of Cadbury Trebor Basset in the UK as an example. It is targeting growth areas for confectionery sales such as pubs, clubs, leisure centres and work canteens as well as installing vending machines in unusual locations such as NCP car parks.

The shares rose 14p to 439p yesterday.