Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, January 27, 1995 TAG: 9501270043
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: LONDON LENGTH: Medium
The merger would make Cadbury the No. 3 player in the $49 billion U.S. soft drink industry, behind beverage leaders Coca-Cola Co. and Pepsi-Cola Co.
It would enable chairman Dominic Cadbury to achieve his goal of a dominant position in the growing noncola sector of the world's biggest market.
Dr Pepper-Seven Up, based in Dallas, is the third biggest U.S. soft drink company, with about 11 percent of the market. Rural Retreat, in Wythe County, is one of several places in the United States that lay claim to developing the formula for Dr Pepper.
Cadbury has about 5 percent of the U.S. market with brands including Schweppes, Canada Dry, Crush, A&W and Sunkist.
Cadbury offered $33 per share in cash for the 77 percent of Dr Pepper shares it doesn't already own. Dr Pepper was the most active issue on the New York Stock Exchange on Thursday, rising 2 to 321/2.
Cadbury said it would finance the offer by raising $632 million from shareholders. The company will raise another $177.6 million through an unusual arrangement in which it will ask shareholders to take extra stock in lieu of dividend payments.
The remaining money will come from a planned preferred-stock offering in the United States and from borrowing. Cadbury is also assuming $828.4 million in Dr Pepper debt.
Cadbury will get global rights to sell Dr Pepper brands, but only U.S. rights to sell Seven-Up brands. Pepsi-Cola owns the international rights to Seven-Up brands.
The merger with Dr Pepper will likely lead to job losses in the United States, but Cadbury executives would not say how many people could be affected.
A Cadbury takeover of Dr Pepper has been viewed by many beverage industry analysts as inevitable ever since Cadbury increased its stake in the company to 25.9 percent from 5.7 percent with a $231 million stock purchase in 1993.
Cadbury currently owns 23 percent of Dr Pepper.
Analysts say the deal makes good strategic sense.
Cadbury ranks third in the global soft drink industry but runs a distant fourth in America. A combination with Dr Pepper would make it third with 16 percent of the market, behind Coca-Cola at 41 percent and Pepsi at 32 percent.
A merger would give Cadbury the clout it wants in America and provide Dr Pepper with greater ability to grow internationally.
by CNB