Companies
Cadbury Schweppes to separate drinks and confectionary businesses
Cadbury Schweppes is to separate its confectionary and
American-based beverages business. The company said its board is evaluating the options for
separation in order to maximise shareholder value and will provide more
information at its trading update in June.
The announcement that the businesses would be separated
came after the group was targeted by US activist investor, Nelson Peltz. Peltz
informed the company that he and his affiliates had interests in 2.98% of its
issued shared capital. Most commentators suggested that his main intention would
be to unlock shareholder value through a demerger of the business.
Cadbury sold its drinks businesses in Europe, Syria, and
South Africa last year and said it had been working to improve its American
drinks operations and believes now it is strong enough to be a stand-alone
business. It had discussed the company’s plans, including views on separation,
with most of its major shareholders following its preliminary results
announcement last month, Cadbury said.
The Transport and General Workers Union (T&G) expressed
concern at Peltz’s intervention. Brian Revell, T&G national organiser for food
and agriculture, said that Cadbury's was an iconic British brand and a very
successful company which did not need the attention of Peltz. Referring to the
company’s Quaker heritage Revell claimed that the company had provided benefits
for all its stakeholders including its shareholders and workforce.
The editorial in the Financial Times (FT, 16 March) noted the speed of Cadbury’s
announcement following Peltz’s share acquisition and the subsequent anguish
about a betrayal of the company’s roots and speculation about possible bidders
for the demerged business. However, Cadbury’s, the FT said, was already a
changed business that was no longer family dominated and was run by
Harvard-educated lawyer, Todd Stitzer. Shareholders were obviously keen for the
business to be split, but now they would have to bear the consequences for
having set the demerger in motion, the FT said.
Nils Pratley in The Guardian (16
March) said Stitzer had ruled out a demerger as recently as last October. He said that
private equity bidders may see the confectionary business as more attractive
than the drinks operation. However, with the share price having risen 16% this
week Stitzer may have given himself time to rebuild the business—hit by product
recalls and missed targets last year—and keep potential bidders at bay.
Links
Cadbury Schweppes
Transport and General Workers Union
Financial Times
The Guardian
April, 2007 |
