Cadbury Schweppes Case Study
David Collis Toby Stuart Troy Smith
Cadbury Schweppes: Capturing Confectionery (A)
In late October 2002, Sir John Sunderland, chairman and CEO of Cadbury Schweppes, contemplated the future of his global confectionery and beverage company. Over the previous decade, the company had made several acquisitions to complement its portfolio of chocolate, soft drinks, sugar confectionery (candy), and gum. Now it was considering a bid for Adams, the number two player in the worldwide gum business and, with its Halls brand, a leader in sugar confectionery. After researching the acquisition for many months, his Chief Strategy Officer Todd Stitzer and the Adams deal team were approaching the point of no return. Sunderland knew that they would have to bid more than $4 billion to have any chance of winning Adams. Should they go ahead with the offer and if so, was all debt financing of the bid appropriate? At this lofty price, how certain could the Cadbury Schweppes’ team be that they could create value? He wondered, was the strategy behind the acquisition sound, and could the leadership team successfully execute an acquisition and integration plan of this magnitude? (Exhibits 1, 1a, and 2).
History of Cadbury Schweppes
Cadbury Schweppes was formed by the 1969 merger of a beverage company started by Jacob Schweppe in 1783 in Geneva, Switzerland and a chocolate business started by John Cadbury in Birmingham, U.K. in 1824. While Schweppes was best known for its mixers, such as tonic water, the firm was the number three competitor in the beverage business after Coca-Cola and PepsiCo. Cadbury Schweppes was the number four player in the global chocolate business, having exited related businesses such as biscuits (cookies) in a restructuring in the 1980s. This had focused the company on its core beverage and confectionery brands, the former of which was fortified by the acquisitions of carbonated soft drink (CSD) brands Canada Dry and Sunkist (1986), Dr.
Cadbury Schweppes: Capturing Confectionery (A)
In late October 2002, Sir John Sunderland, chairman and CEO of Cadbury Schweppes, contemplated the future of his global confectionery and beverage company. Over the previous decade, the company had made several acquisitions to complement its portfolio of chocolate, soft drinks, sugar confectionery (candy), and gum. Now it was considering a bid for Adams, the number two player in the worldwide gum business and, with its Halls brand, a leader in sugar confectionery. After researching the acquisition for many months, his Chief Strategy Officer Todd Stitzer and the Adams deal team were approaching the point of no return. Sunderland knew that they would have to bid more than $4 billion to have any chance of winning Adams. Should they go ahead with the offer and if so, was all debt financing of the bid appropriate? At this lofty price, how certain could the Cadbury Schweppes’ team be that they could create value? He wondered, was the strategy behind the acquisition sound, and could the leadership team successfully execute an acquisition and integration plan of this magnitude? (Exhibits 1, 1a, and 2).
History of Cadbury Schweppes
Cadbury Schweppes was formed by the 1969 merger of a beverage company started by Jacob Schweppe in 1783 in Geneva, Switzerland and a chocolate business started by John Cadbury in Birmingham, U.K. in 1824. While Schweppes was best known for its mixers, such as tonic water, the firm was the number three competitor in the beverage business after Coca-Cola and PepsiCo. Cadbury Schweppes was the number four player in the global chocolate business, having exited related businesses such as biscuits (cookies) in a restructuring in the 1980s. This had focused the company on its core beverage and confectionery brands, the former of which was fortified by the acquisitions of carbonated soft drink (CSD) brands Canada Dry and Sunkist (1986), Dr.
Cited: Source: Cadbury Schweppes, “Project Bond: Pre Board Meeting Review,” October 18, 2002, pp. 14. Provided by the company. a Includes, for example, Colgate, Johnson & Johnson, GlaxoSmithKline, and P&G. |Percent of Revenue Synergies in Purchase Price |0% |0% |0% |0% |0% |0% | Source: Cadbury Schweppes, “Project Bond: Board Meeting Update,” October 24, 2002, pp Source: Adapted from Cadbury Schweppes, “Project Bond: Pre Board Meeting Review,” October 18, 2002, pp. 11. Provided by the company; SDC Platinum, a Thomson Financial product, accessed January 2008. [viii] Mary Kissel, “Personal Journal: Personal Finance & Spending—Face-Off: Focus on Cadbury Schweppes,” The Wall Street Journal Europe, October 4, 2002, p. 2, via Factiva, accessed October 2007. [ix] Warren Ackerman, Andy Smith, Jayshree Venkatramani, Céline Pannuti, Claire Windle, Cadbury Schweppes: Adams to the Rescue? Schroder Saloman Smith Barney, December 2, 2002, p. 18, via Thomson Research/Investext, accessed October 2007. [x] Cadbury Schweppes, Report and Accounts Form 20-F 2002, (London: Cadbury Schweppes, 2003), pp. 8-9, http://www.cadburyschweppes.com/NR/rdonlyres/47CE8BC6-D336-400E-9747-502A217CBDFD/0/2002_ar.pdf, accessed October 2007.