Schweppes sale fizzes

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The Independent Online
CADBURY Schweppes insisted this weekend that the $1.9bn (pounds 1.2bn) sale of soft drinks brands to Coca-Cola would go ahead despite objections from German and Australian competition authorities.

David Kappler, Cadbury finance director, said: "We remain confident that the deal will go through. We did a lot of work analysing the competition issues prior to announcing the deal."

Nevertheless, German and Australian authorities are not alone in raising objections. The deal involves 120 countries and, to date, Cadbury has clearance from only six, mainly smaller European governments. Mexico has signalled that it may fight the deal.

On Friday, Eike Sackofsky - a spokeswoman for the cartel office in Berlin - confirmed that a mandatory deal warning had been sent to both companies. She said: "At the moment, we are minded to block the deal."

The German authorities are concerned that Coca-Cola's dominance, with more than 50 per cent of the German market, would be reinforced by the purchase of Schweppes and other Cadbury brands.

Mr Kappler counters that these brands only account for just 1 per cent of the German market.

In Australia, Cadbury and Coca-Cola have been forced to revise the terms of the deal. The original agreement would have enabled Coca-Cola to raise its market share from 65 to 70 per cent. Now Coca-Cola has submitted a new proposal to the Australian Competition and Consumer Commission which includes some brand disposals.

Mr Kappler said: "The [Australian] Commission wanted to ensure that there is a strong competitor to Coca-Cola in the market. I'm not anticipating any material adverse effect on the total consideration we shall receive."

Michael Branca, an analyst at Lehman Brothers, commented: "As Coke moves to near monopoly status in some markets, certain local regulatory authorities could well baulk at Coke's dominance."

In North America, Coke has a 45 per cent share of the soft drinks market, compared to Pepsi's 31 per cent. According to Beverage Marketing, a New York Consultancy, it has 54 per cent of non-US markets.