Cadburyâs three non âcore divestments confirms its M&A strategy
- June 05, 2007
||divestments agreed or completed, June 2007;
||Cottee & Rose (Australia), Allan Candy (Canada), Cadbury Italia (Italy);
||conserves (Australia), bulk candy (Canada), confectionery (Italy);
||HJ Heinz (Australia), an SPV (Canada), Leaf Italia (Italy);
||Cadbury-Schweppes PLC (UK), worldâs largest confectionery company;
||portfolio refocus on high-growth confectionery markets and categories;
||attractive valuations, opportunism;
||200 mln GBP raised by Cadbury, out of 250 mln GBP target from divestments in 2007
These three deals confirm that Cadbury is putting its words into action, as they are consistent with the groupâs new strategy of divesting non-core and low-growth businesses around the world. It still has at least 50 mln GBP of divestments in its pipeline; these deals give strong clues at to which business will be the next to go; we think itâll be Monkhill in the UK.
In the case of the Australian divestment, itâs no surprise that Cadbury should regard jams, toppings and jellies as non-core, and theyâve sensibly retained the rights to the Cottee & Rose brand with respect to confectionery.
Itâs interesting however that Heinz should appear as a buyer, given their internal problems with activist shareholders, and general focus on higher added-value sauces and ready meals (jam is hardly in the same league). Must have been a locally -driven deal.
In the Canadian case, itâs no surprise that Cadbury should consider the bulk and seasonal sides of the candy business as unattractive. The company established to acquire it, Allan Candy Company Limited, sounds like a vehicle for some sort of local MBO or MBI, especially since the consideration includes a C$4 mln deferred payment.
More surprising is the Cadbury Italia deal. Does this mark an exit by the group from the Italian market? Interesting also to see Leaf appear as a buyer. Since the private equity firm CVC acquired them, in 2005, theyâve mostly been in divestment mode; it looks like theyâre now doing some consolidation of their own.
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