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Cott eyes move for Cadbury drinks

By Chris Mercer , 16-Apr-2007

Rumours were again swirling around Cadbury Schweppes this weekend, after the world's largest private label soft drinks maker said it was eyeing a move for the group's US drinks arm.

Canada's Cott Corporation said it had been approached by other interested parties over Cadbury's Americas Beverages division, and was "exploring the potential benefits of participating in possible industry consolidation".


Talks with legal and financial advisors had also begun, the firm added.


News of Cott's interest will add weight to speculation that Cadbury is likely to spin off its US beverages arm, which includes the 7UP and Dr Pepper brands, following its recent decision to split this business from its confectionery division.


Some analysts have considered a sale of Cadbury's US drinks arm likely for some time, but have met repeated denials from the firm.


Cadbury has privately described the business as a "cash cow", generating high revenue that can be farmed into investment for the confectionery and chewing gum divisions.


Now, that may change. Cadbury's decision to split its business comes after the firm last year sold its European soft drinks division to private equity for £1.4bn.


And the split was also accompanied by results of an internal review, which found "significant opportunities" for higher margins and sales in confectionery, but fell short of a similar optimism for beverages.


An offer for Americas Beverages from Cott Corporation could see the group emerge from shadows of private label soft drinks for the first time.


It has been a painful period for Cott, which was hit hard by falling demand for carbonated soft drinks and has been forced into job cuts and restructuring in North America over the last couple of years.


Cott' 's sales would have dipped 3.6 per cent in 2006 had it not been for the group's takeover of Macaw in the UK.


It is thought private equity companies could be the 'interested parties' to have approached Cott.


"Some people in private equity might be invited by the cash flow of the beverage business," Julian Lakin, analyst at Mirabaud Securities, told BeverageDaily.com immediately after Cadbury announced the split.


Lion Capital and Blackstone Group are two private equity groups already linked to a possible move for Cadbury's drinks arm.

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