Cadbury Schweppes confirmed yesterday that it would sell its European drinks arm to concentrate on its sweets and its US drinks business.
The world's largest confectioner said the sale of the business, which includes brands such as Orangina and Schweppes tonic water outside the UK and is estimated to be worth just over £1 billion (€1.47 billion), was expected to start soon.
It said it hoped to use the proceeds to cut its £4.3 billion debt. Carlyle, the US private equity group, and Cinven are seen as possible financial buyers while Pepsi has been cited as a prospective trade buyer.
Todd Stitzer, chief executive, said the division did not meet the company's performance criteria. He said: "The potential for growth and value creation is greater in the group's other operations, and therefore we believe it is in the best interests of our shareowners to investigate a sale."
The bulk of the division's sales are in France, Germany and Spain although 15 per cent comes from the UK, parts of North and West Africa and the Middle East. The Schweppes brand in the UK is owned by Coca Cola.
Last year, the division's 3,000 staff generated £116 million underlying profit on turnover of £653 million - 10 per cent of group revenues.
There has been speculation the company could drop the Schweppes name once the sale goes through but a spokesman said there was no implication in the sale for the name of the group. Cadbury shares rose 13 to 560p. Goldman Sachs is handling the sale
A source close to the matter said Cadbury would send out information to prospective bidders in the autumn. "The business itself is pretty attractive both for private equity and strategics," the source said, referring to strategic or corporate buyers.
The European drinks business posted 2004 earnings before interest, tax, depreciation and amortisation (EBITDA) of £139 million, and analysts put an 8.5 times multiple on the business to give it a value of £1.2 billion .
This multiple compares with 11 times EBITDA Cadbury paid for France's Orangina, 7.4 times for Spain's La Casera and 8.2 times for buying out Germany's Apollinaris in building up a European business in recent years, analysts said.
