Cadbury and Pernod sign soft drinks deal
On September 21, the UK beverage and confectionery group Cadbury Schweppes plc and the French spirits group Pernod Ricard SA confirmed that they have signed an agreement for the purchase of Pernod Ricard's soft drinks brands and businesses in Continental Europe, North America and Australia for Euro700m. The acquisition is subject to regulatory approval by EU and US competition authorities. The transaction primarily embraces the Orangina, Pampryl, Champomy and Yoo-Hoo brands and associated businesses. The process of consultation conducted by Pernod Ricard with the Orangina-Pampryl Works Council has been successfully completed. The businesses being acquired had sales in 2000 of Euro466m and pro-forma EBITDA of Euro63m. Orangina accounts for approximately half of the total volume being acquired. The agreed cash consideration is 11 times 2000 pro-forma EBITDA. The value of the net assets being acquired was Euro119m at 31 December 2000. It is expected that the return from the acquisition will exceed its cost of capital within three years of acquisition by Cadbury Schweppes. Under a separate arrangement, Pernod Ricard also has an option to sell its soft drinks business in all other countries to Cadbury Schweppes at a future date for a separate consideration, not expected to exceed Euro35m. These countries represent approximately 5 per cent of the profits of Pernod Ricard's total soft drinks business. Cadbury Schweppes existing soft drinks business in France is focused on the Schweppes range for adults and the Oasis still drinks range for children. The acquisition of Pernod Ricard's soft drinks business will significantly strengthen the position of Cadbury Schweppes in France, Europe's third largest soft drinks market. Orangina is also sold elsewhere in Europe and sales are expected to benefit from access to a stronger bottling and distribution network. In the US, Orangina and Yoo-Hoo are premium brands which complement the existing beverages businesses of Cadbury Schweppes. The transaction will be structured as a mixed purchase of assets and the shares of certain Pernod Ricard affiliates. In addition to the purchase price of Euro700m, Cadbury Schweppes has agreed to make a payment to Pernod Ricard, estimated at approximately Euro18m, to compensate Pernod Ricard for certain tax liabilities arising from the transaction structure. This cost is exceeded by the tax benefits accruing over time to Cadbury Schweppes.