European private equity firms are considered potential buyers of Cadbury Schweppes’ European soft drinks business, which might be up for sale as the company deepens its relationship with Goldman Sachs. KKR has been touted as a possible financial bidder, while, on the trade side, PepsiCo is keen to extend its European reach.
Cadbury Schweppes has refused to comment on any possible sale despite claims that Goldman has been appointed to seek buyers for the unit. Widely tipped for some time, a sale of the unit would be expected to raise about £1bn for the group, freeing it to extend its reach into the US confectionary market.
The UK-listed confectionery and soft drinks group recently appointed Goldman Sachs and UBS as corporate brokers, in place of long-time broker ABN AMRO. The move has prompted speculation that the relationship with Goldman Sachs in particular might be expanded to encompass a financial advisory role on any possible disposals.
Goldman’s European president, Simon Robertson, might have been influential in winning business from Cadbury Schweppes. As a director of Kleinwort Benson, Robertson had a strong relationship with members of the Cadbury family, who remain influential within the group.
Cadbury Schweppes’ European beverages business is focused on the French, Spanish and German markets, where the groups’ brands include Orangina, Oasis and Schweppes. The unit is distinct from the American drinks operation, where Dr Pepper and 7Up are produced and marketed under licence.
The sale of the European drinks business would make Cadbury Schweppes’ remaining listed confectionery business more attractive. With a strong European business and increasing penetration in the US, the pared down group could become a target itself for a trade buyer looking to capitalise on its transatlantic presence.
Cadbury Schweppes has posted strong first-half 2005 results, with 7% growth in its confectionery division and a 4% rise in its soft drinks sales. Growth was led by increased sales in the American markets across both elements of the group, and came despite a 1% fall in profits in the European beverages division.