Blackstone and Lion Capital, the buy-out groups, yesterday won the auction to acquire Cadbury Schweppes' European beverage arm for €1.85 billion, snapping up some of Europe's best known soft drink brands.
The duo won against heavy competition from rival private equity firms, including the UK's Permira and PAI of France. PAI had been working with PepsiCo before Cadbury shut the US drinks group out of the process.
The business, which owns brands including Schweppes, Orangina, Oasis and TriNa, was acquired on a multiple of 9.5 times forecast 2005 earnings before interest, tax, depreciation and amortisation (EBITDA) of €195 million. It is expected to generate surplus cash of €160 million on sales of €1 billion this year.
The deal is the biggest private equity transaction in the European food and beverage industry, according to Dealogic. It also helps Goldman Sachs, which advised Cadbury, keep pole position in the European advisory league tables.
Cadbury said it intended to focus on its "faster-growing confectionary and other beverage businesses", with sale proceeds used to pay down net debt of £4.3 billion (€6.3 billion) at the end of June.
Buy-out groups were attracted by Cadbury's strong brands, cash flows and margins, and scope to improve management. Cadbury regarded the business as peripheral since an attempt to sell it to Coca-Cola in 1999 was blocked by competition authorities.
Javier Ferran, the veteran Bacardi executive who joined Lion Capital this year, will chair the business.
Cadbury has agreed a €92.5 million break fee, 5 per cent of the deal's value, if it does not accept the binding offer. The size of the fee partly reflects the need for the deal to be approved by a works council in France, one of its most important markets.
The financing package totals close to €1.5 billion and will include about €300 million of loans. Total debt will be about seven times EBITDA.
