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Cadbury eyes Coke cash
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July 28, 1999: 9:38 a.m. ET
Report: Confectioner expects $700M from partial sale of soft drink business
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LONDON (CNNfn) - British confectioner Cadbury Schweppes is nearing a deal to sell most of its carbonated soft drink businesses outside the United States and Continental Europe to American soft drink maker Coca-Cola Co. for around $700 million, according to a report published Wednesday.
John Sunderland, Cadbury's chief executive officer, told Reuters in London that his company expects "shortly" to receive the first of two cash payments from Coke. The deal ultimately could add a total of $1 billion to the company's coffers.
Sunderland said Cadbury -- the maker of such carbonated beverages as Dr Pepper, A&W Root Beer and Canada Dry - plans to use proceeds from the sale to fund an acquisition in its confection businesses.
At the same time, Sunderland denied reports that Cadbury, Europe's number-three soft drink company behind Coke and PepsiCo, is eyeing French chewing gum maker Hollywood or candy maker Krema, which U.S.-based tobacco and food company Philip Morris Co. has put up for sale.
The news came as Cadbury reported a 5.6 percent drop in pretax profit in the first half, to 252 million pounds ($400.7 million). Cadbury blamed the decline on weaker results in "challenging" markets such as mainland Europe.
"Increasing momentum in the first half gives us confidence that progress in 1999 will be satisfactory," the company added.
Sales over the period rose 2 percent, to 1.89 billion pounds.
In the earnings report, Cadbury referred to the negotiations with Coke only in passing, saying, "We are discussing final arrangements for the disposal of our soft drinks brands to Coca-Cola in the great majority of our markets outside the U.S. and Europe."
Cadbury Schweppes South Africa, in which the parent holds a 55 percent stake, also has entered into talks to sell its carbonated soft drink business in South Africa to Coke, the company said in its statement.
Regulatory concerns galore
Whatever the outcome, the sale that emerges from the talks will be a shadow of Cadbury's initial ambitions following earlier setbacks.
In May, Cadbury was forced to drastically scale back a planned sale of its non-U.S. beverage businesses to Coca-Cola amid mounting opposition from regulators in as many as 20 countries, who were wary of further boosting Coke's dominant market position.
Under a revamped strategy, Cadbury cut the price of the businesses by around 40 percent to $1.76 billion, insisting at the time that the trimmer terms didn't invalidate its basic strategy.
Dora McCabe, a Cadbury spokeswoman, said the sale would cover around 160 countries, including three in Europe -- Britain, Ireland and Greece -- where terms of the proposed transaction passed regulatory muster.
McCabe said Cadbury still awaits final regulatory clearance from New Zealand, which is expected to give a green light shortly, and Australia, Canada and Mexico. She said a deal still will go through, however, even if one or all of those countries balks at the last minute.
Last year, soft drink sales accounted for about 60 percent of Cadbury's $6.8 billion revenue. By comparison, the beverage businesses in Europe and the United States that Cadbury plans to retain generated 51 percent of total revenue, McCabe said.
Cadbury (CBRY) shares were down 2.77 percent at 413 pence in London Wednesday afternoon. 
--from staff and wire reports
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