LONDON — Cadbury Schweppes P.L.C. said it plans to split into two businesses — one focused on drinks, the other on confectionery. The move comes only a few days after the company said U.S. billionaire Nelson Peltz bought a stake in the company, sparking takeover speculation.
Full details of the business split are expected to be provided in June, when the company delivers its trading update.
"This decision is of great significance for the board and the company," said John Sunderland, chairman. "It has been facilitated by acquisitions and disposals over the last decade designed to create a strong and potentially independent Americas Beverages business. In the same time, we have built the world’s largest confectionery business.
"We believe now is the moment to separate and give both management teams the focused opportunity to extract the full potential inherent in these excellent businesses."
Cadbury has transformed its makeup through numerous acquisitions that have broadened its category presence and geographic footprint in the global confectionery industry. At the recent Consumer Analysts Group of New York conference, Cadbury officials highlighted a number of ways the company hoped to significantly improve margins and returns going forward, including improving the margin performance in emerging markets, reconfiguring the company’s supply chain, and reducing selling, general and administrative costs.
"These initiatives will require incremental investment, and we believe that the returns for our shareowners will be maximized through a focused stand-alone confectionery business," the company said.
Acquisitions also have played a role in the way the company has operated its beverages business. However, Cadbury has been equally active in selling those businesses where the company believed it could deliver value to shareholders via a strategic premium on disposal. Since 1999, Cadbury has sold its beverage businesses in more than 180 markets. Last year, the company sold its beverages operations in Europe, Syria and South Africa for £1.4 billion.
Looking specifically at Americas Beverages, which sells carbonated and non-carbonated drinks in the United States, Canada and Mexico, Cadbury said a separate unit will allow the company to capitalize on strong brand equities, derive further benefits from innovation and deliver ongoing cost and revenue synergies from the bottling acquisitions.
"We have actively sought to significantly improve the performance of our business in the Americas over the last three years, first through restructuring and then by a focus on core brands," the company said. "This culminated in 2006 when we secured and strengthened our route to market through the acquisition of several of our third-party bottlers (including Dr Pepper/Seven Up Bottling Group)."
Mr. Peltz’s stake in the company was announced on March 13. He has a record as a shareholder activist — buying up stock in companies he sees as undervalued then agitating for change from within — and analysts said the market also will be watching closely to see if he tries to gain a seat on the Cadbury board. In late November, Mr. Peltz won a seat on H.J. Heinz Co.’s 12-person board.