Cadbury Schweppes (NYSE:CSG) announced today that it plans to spin-off its beverages group into a new company and abandon its efforts to auction the business off amid credit market concerns. The American beverages unit will become the world's third largest softdrink company with Dr. Pepper and 7-UP among its brands.

"While the board continues to be committed to the principle of maximizing share owner value, it does not believe current market conditions will facilitate an acceptable sale process in the foreseeable future. Accordingly, our focus is now on demerging our Americas Beverages business," said the company in a statement.

The move to spin-off comes after the company rejected a large offer from an investor consortium including Blackstone, Lion Capital and KKR because the firms wanted the seller to help with financing. Another consortium consisting of Bain Capital , TGP and Thomas Lee also failed at their attempts to purchase the drinks business from Cadbury.

Morgan Stanley and Goldman Sachs advised Cadbury to separate the business segments after evaluating the other offers. Given the fact that spin-offs tend to outperform the larger market during their first two years and the fact that this spin-off will create a major competitor in the softdrinks business - this stock is definitely one worth watching!

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