Glenboden M & A Originations

Cadbury’s three non –core divestments confirms its M&A strategy

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Origination Status divestments agreed or completed, June 2007;
Asset Cottee & Rose (Australia), Allan Candy (Canada), Cadbury Italia (Italy);
Sector conserves (Australia), bulk candy (Canada), confectionery (Italy);
Buyer HJ Heinz (Australia), an SPV (Canada), Leaf Italia (Italy);
Seller Cadbury-Schweppes PLC (UK), world’s largest confectionery company;
Buyer Rationale portfolio refocus on high-growth confectionery markets and categories;
Seller Rationale attractive valuations, opportunism;
NBs 200 mln GBP raised by Cadbury, out of 250 mln GBP target from divestments in 2007
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These three deals confirm that Cadbury is putting its words into action, as they are consistent with the group’s 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 it’ll be Monkhill in the UK.

In the case of the Australian divestment, it’s no surprise that Cadbury should regard jams, toppings and jellies as non-core, and they’ve sensibly retained the rights to the Cottee & Rose brand with respect to confectionery.

It’s 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, it’s 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, they’ve mostly been in divestment mode; it looks like they’re now doing some consolidation of their own.

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