Blackstone and Lion Capital have jointly acquired the European beverages division of Cadbury Schweppes (CSEB) in a transaction that values the business at a higher-than-expected €1.85bn (US$2.2bn).
The Goldman Sachs-run auction saw the Anglo-US consortium fight off rival bids from French buyout firm PAI Partners, which was thought to be favourite, and UK peer Permira. US soft drinks giant PepsiCo also failed to make it into the final round. According to a source close to the deal, the nearest bid was US$1.75bn.
Javier Ferran, a director of Lion Capital, plans to oversee CSEB as chairman. He joined Lion Capital earlier this year after the conclusion of a 20-year career at Bacardi, most recently as president and chief executive.
CSEB is a natural fit for Lion Capital, which was spun off from US-based parent Hicks Muse Tate & Furst and went on to buy Weetabix, Materne, Jimmy Choo and Wagamama. The firm focuses on branded products in consumer-related sectors and contains the core of the team that masterminded Hicks Muse’s investments in United Biscuits and Hillsdown Holdings, which was later to become Premier Foods.
Since spinning out, the group has been criticised in some quarters for having a lean investment team after a series of departures to hedge funds and rival private equity groups. The investment record so far is compelling, however.
CSEB includes several soft drink brands, such as Schweppes, Orangina, Oasis and TriNa, which compete in the growing Continental European market. With sales in 2005 expected to be approximately €1bn, the group’s brands target the premium, non-cola, fruit-based segment of the €140bn European soft drinks market.
David Blitzer, senior managing director of Blackstone said: “This investment continues our focus of investing in high quality, stable, cash-generative businesses. This has never been more important than at this point in the investment cycle.”
NM Rothschild and JPMorgan acted as financial advisers to Lion and Blackstone. Debt is being provided by JPMorgan, Citigroup and Bank of America.
Flouted bidder PepsiCo owns 5% of UK soft drinks company Britvic, which started to pre-market its own flotation last week to provide an exit for the company’s other backers, Intercontinental Holdings, Whitbread and Pernod Ricard.
The IPO of Britvic, which is being advised by Deutsche Bank and Citigroup, is based on a multiple of about 12x forecast 2006 earnings. The European beverage sector trades at 15x 2006 earnings but Britvic’s assumed growth is seen as being slower than that of its Continental peers, according to market sources. A trade or financial sponsor sale was ruled out by PepsiCo as Britvic is its key UK distributor.