Cadbury Schweppes'
(NYSE:CSG) U.S. beverages business may receive significant interest
from twelve private equity firms, according to an article in the Wall
Street Journal. The first major group of contenders consists of
Blackstone, KKR and Lion Capital while the second is composed of Bain
Capital, Texas Pacific and Thomas Lee. It is uncertain whether the
other six firms interested are considering joining a consortium or plan
on placing individual bids.
Cadbury expects the beverages
division to draw more than 8 billion that it would return to
shareholders via a share buyback or special dividend. The move would
unlock significant value but would not preclude the company from making
acquisitions of its own, as the company has a strong balance sheet and
could easily raise an additional 10 billion if needed.
Cadbury,
without its beverages division, would be the largest confectionery
group in the world and could work to increase its already-dominant
position. This is good news for the long run, but may hurt the share
price in the short term depending on the terms of any acquisitions.
Consequently, this deal could turn out to be a mixed bag for
shareholders in the short term.
While the company was quick to
note that the decision to put the division up for sale has not been
officially announced, CSG is definitely a stock to
keep an eye on given the significant interest by private equity!
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