|
Snapple Schwepped up
|
 |
September 18, 2000: 3:02 p.m. ET
British drinks firm Cadbury buys Snapple for $1.45B in cash, debt
|
NEW YORK (CNNfn) - Britain's Cadbury Schweppes PLC agreed Monday to acquire Snapple Beverages Group from Triarc Companies Inc. for $1.45 billion in cash and debt, a move aimed at expanding Cadbury's portfolio in the U.S. soft drinks market.
Cadbury (CSG: Research, Estimates), which owns Dr Pepper, 7UP and non-carbonated drinks such as Hawaiian Punch, said it expects the acquisition to boost its earnings immediately and to result in cost savings of about $500 million.
Triarc, which bought Snapple for $300 million three years ago from Quaker Oats (OAT: Research, Estimates), returned the business to profitability and announced in June it intended to take the company public.
 "We were going to do an IPO, and Cadbury, who's the logical owner of Snapple, came in to see us and they just offered us a price that far exceeded what we could expect through an IPO, so we took it," Triarc Chairman and CEO Nelson Peltz told CNNfn's In the Money.
Anne Gurkin, analyst with Davenport & Co., told CNNfn that Triarc received a good price for the business, but considering the increase in case volume Cadbury received, the British firm did not overpay.
According to a company spokeswoman, Cadbury has no plans for a Snapple initial public offering.
The acquisition, which includes the beverages Snapple, Mistic, Stewart's and Royal Crown Cola, signals a major push in the beverage industry for Cadbury, which has sold a large portion of its overseas beverage business to Coca-Cola Co. (KO: Research, Estimates).
The acquisition of Snapple will "significantly expand Cadbury Schweppes' position in the U.S. soft drink market," Chief Executive John Sunderland said in a statement.
"We already have, we believe, the best portfolio of non-cola carbonated soft drinks," Cadbury Chief Operating Officer John Brock told CNNfn. "There was a big part of the market that we wanted to be in and we weren't, and that is the non-carbonated premium refreshment beverage business."
 Brock said recently colas have not been growing as fast as non-colas, while non-carbonated beverages such as juice and tea gained market share.
Snapple has had a checkered past after Quaker bought the brand for $1.7 billion in 1994. Sales plunged and Quaker was forced to offload the business for less than a fifth of what it originally paid.
The cause for decline in Snapple sales "lay in mismanagement and not in the brand," Sunderland said in a conference call for analysts.
Sunderland said Quaker's alienation of distributors, and poor marketing were among the reasons for the brand's decline.
 Quaker dropped the brand's longtime advertising campaign in favor of quirky ads that never took hold. In the summer of 1996 it gave away the flavored drinks in a $40 million nationwide campaign. Even that failed to jump-start sales.
Under Triarc's direction, case sales of Snapple have risen for 11 straight quarters.
Brock credits the Snapple resurgence to Snapple CEO Mike Weinstein and his team, who will remain in control under Cadbury.
Snapple made a profit of $111 million on sales of $772 million in fiscal 1999.
Cadbury plans to pay $910 million in cash and assume $420 million in debt, while providing employee options will cost another $120 million. The company also plans to pay $200 million for a U.S. tax provision.
The acquisition, which is to be funded from existing and new loan facilities, is expected to be completed by November.
Triarc has not decided what to do with its cash windfall, but CEO Peltz told CNNfn that another acquisition was likely. (222K WAV) or (222K AIFF)
Cadbury shares rose 9.75 pence to £3.90 in London, and the company's American depositary shares fell 13 cents to $22.37 in midafternoon trading on the New York Stock Exchange. Triarc (TRY: Research, Estimates) stock rose $1.25 to $25.50 also on the NYSE. 
|
|
|
|
|
 |
|
