Cadbury gives up drinks in Lent

It took a year, but Cadbury Schweppes has finally managed to get shot of its US drinks business...

Last Updated: 06 Nov 2012

Cadbury Schweppes said today that it had finally agreed a finance package to demerge its US drinks business from its confectionery arm – more than a year after it first came up with the idea. Just when it looked like the whole thing might be dead in the water, it’s managed to persuade five banks to lend it an extra £1.9bn to fund the deal (which should now go through in May). Clearly the banks decided that we’ll still want to stuff our faces full of chocolate, regardless of our economic woes.

Cadbury has been dogged by speculation that the credit crunch would scupper the demerger altogether, and this has taken a heavy toll on its share price. After all, it had to give up its original plan of flogging the business to the highest private equity bidder, because none of the interested parties could stump up the funds. And only last week, an analyst at Bear Stearns argued that the demerger might suffer a similar fate. We’re guessing he might be a bit red-faced today (in fact, with its share price plummeting on rumours that it’s about to run out of cash - fiercely denied by the bank of course - it’s not turning out to be the best of weeks for Bear).

Assuming the deal goes through, Cadbury’s plan is to use the new cash to repay some of its existing debt, leaving it with about £1.65bn on its books. Meanwhile the drinks business – soon to be not-very-catchily renamed as the Dr Pepper Snapple Group – will have about £1.9bn in debt. The City seems to think this shouldn’t be too painful.

The news will be a welcome relief for CEO Todd Stitzer, who’s had activist investor Nelson Peltz breathing down his neck for twelve months now. Peltz, who wants the board to unlock more value for shareholders, applied another forceful boot to their collective posterior in December, promising to crank up the pressure if there wasn’t real progress in 2008.

We’re pleased that Stitzer’s got a bit of breathing space – although we’re not quite ready to forgive him yet for resurrecting Phil Collins’ pop career...

Find this article useful?

Get more great articles like this in your inbox every lunchtime

A leadership thought: Treat your colleagues like customers

One minute briefing: Create a platform where others can see their success, says AVEVA CEO...

The ignominious death of Gordon Gekko

Profit at all costs is a defunct philosophy, and purpose a corporate superpower, argues this...

Gender bias is kept alive by those who think it is dead

Research: Greater representation of women does not automatically lead to equal treatment.

What I learned leading a Syrian bank through a civil war

Louai Al Roumani was CFO of Syria's largest private retail bank when the conflict broke...

Martin Sorrell: “There’s something about the unfairness of it that drives me”

EXCLUSIVE: The agency juggernaut on bouncing back, what he would do with WPP and why...

The 10 values that will matter most after COVID-19

According to a survey of Management Today readers.