- Cadbury Schweppes has entered into an agreement to acquire the Snapple Beverage Group from Triarc Companies, Inc., for an enterprise value of $1,450 million (£1,028 million).
- Snapple Beverage Group is a US premium beverage company whose brands include Snapple, Mistic, Stewart's and Royal Crown (RC ready-to-drink) Cola. Snapple is the leading brand in the profitable and high growth premium ready-to-drink tea and juice sector of the New Age beverage market.
- During the year ended 31st December 1999, Snapple Beverage Group made EBITDA on a pro forma basis of US$111 million (£79 million) on turnover of $772 million (£548 million).
- Significant operating synergies are expected with a net present value of around $500 million (£355 million).
- In addition, Cadbury Schweppes will pay $200 million (£142 million) for the benefit of a US tax election which will generate annual tax savings over 15 years, with an estimated present value of $250 million (£177 million).
This acquisition meets Cadbury Schweppes value creation criteria and is expected,
prior to goodwill amortisation and restructuring, to enhance EPS from the outset
and to cover the Group's weighted cost of capital within three years.
John Sunderland, Cadbury Schweppes' CEO, said, "The acquisition of
the Snapple Beverage Group will significantly expand Cadbury Schweppes' position
in the US soft drinks market. It meets our strategic criteria of building robust
positions in existing markets and will be strongly value creating. It will substantially
increase our exposure to the profitable and high growth New Age beverage sector
and complements our leading position in flavoured carbonated soft drinks.
"The Snapple brand has shown strong growth and outstanding product and marketing innovation in recent years. We believe this progress can be further enhanced by exploiting the route to market strengths enjoyed by our other beverage interests in the US.
"In addition we expect to obtain significant operating synergies between the Snapple Beverage Group and our Dr Pepper/Seven Up (DPSU) and Mott's businesses.
"The price paid is around 12 times estimated 2000 EBITDA. On conservative assumptions we expect this acquisition to be immediately earnings positive and cover our weighted average cost of capital within three years", Mr Sunderland concluded.
Michael Weinstein, Chief Executive of Snapple Beverage Group said, "We are very excited about the combination of our business with Cadbury Schweppes. The transaction offers a great opportunity to enhance our growth prospects".
Benefits of the Acquisition
The acquisition of Snapple Beverage Group significantly expands Cadbury Schweppes' portfolio in the US soft drinks market.
Cadbury Schweppes' strategy is to build robust and sustainable regional businesses through organic growth, disposal or acquisition. US beverages is one of the Group's core markets. DPSU, Mott's and the DPSU Bottling Group joint venture are well established and successful businesses.
Snapple and the other premium beverages will further complement Cadbury Schweppes' position as the leading flavours beverage company in the US. Snapple is the leading brand in the profitable and high growth premium ready-to-drink tea and juice sector of the New Age beverage market.
Under the leadership of Mike Weinstein, Snapple Beverage Group's CEO and his team, the Snapple brand has shown strong growth and outstanding product and marketing innovation. Cadbury Schweppes believes that this progress can be further enhanced by exploiting the route to market strengths enjoyed by its other beverages interests in the US, allied to Snapple's own powerful direct store delivery system which primarily serves the key convenience channels.
Significant operating synergies are anticipated between the Snapple Beverage Group and the DPSU and Mott's businesses. Hard cost synergies with a net present value of $500 million have been identified across a range of operational areas. These are expected to amount to between $10 - $15 million in year one building to $50 million by year three. The acquisition is expected to be immediately earnings positive and cover Cadbury Schweppes' weighted average cost of capital within three years.
Snapple Beverage Group
Snapple Beverage Group is the leading player in the US premium beverage market. Premium beverages typically command higher prices and margins than products such as carbonated soft drinks. The market has demonstrated strong growth in recent years.
Snapple Beverage Group's premium beverage brand business markets the Snapple, Mistic, Stewart's and RC Cola brands.
- Snapple is the leading premium beverage brand in the US with a 28% market share of the premium beverages sector. Under the brand, the company markets and distributes a wide range of premium beverages including ready-to-drink teas, fruit drinks and juices. About 2% of Snapple's sales are outside the US and Canada.
- The Mistic brand complements the Snapple brand, covering a similar range but offering a sweeter product with stronger fruit flavours, and is targeted more at the younger urban consumer.
- Stewart's is a premium range of flavoured sodas whose main product is root beer.
- RC Cola is a cola brand with an approximate 2% share of the total US cola market. RC is also a supplier of concentrate for private label soft drinks. 12% of RC's sales are outside the US and Canada.
- In 1999 Snapple Beverage Group had revenues of $772 million (£548
million) and generated pro forma EBITDA of $111 million (£79 million).
Snapple contributed approximately 70% of revenue. On a pro forma basis, estimated
net tangible asset value at the date of acquisition is expected to be $80
million. A schedule setting out Snapple Beverage Group's 1998 and 1999
pro forma Sales, EBIT, EBITA and EBITDA is attached in Notes to Editors.
The Acquisition Agreement
Cadbury Schweppes Plc has entered into an agreement to acquire the share capital of the companies constituting the Snapple Beverage Group from Triarc Companies, Inc.
The total consideration for the equity and debt of the Snapple Beverage Group will be satisfied through a cash payment of $910 million (£645 million) and the assumption of certain financial liabilities of Snapple Beverage Group amounting to $420 million (£298 million). After closing, Cadbury Schweppes through the Snapple Beverage Group will make a cash payment for employee options of $120 million (£85 million).
In addition, Cadbury Schweppes will pay $200 million (£142 million) for the benefit of a US tax election. Following completion of the acquisition, Cadbury Schweppes will utilise the provisions of the US Internal Revenue Code enabling it to write off goodwill associated with the acquisition over 15 years. The Board of Cadbury Schweppes believes that the present value benefit to Cadbury Schweppes of such tax treatment is approximately $250 million (£177 million), giving a net value enhancement of $50 million (£35 million).
The cash consideration will be funded from Cadbury Schweppes's existing and new bank facilities.
The acquisition is conditional, inter alia, upon all relevant governmental and regulatory authorisations, consents and approvals being received and necessary filings having been made.
Completion is expected by November 2000.
Other
£ equivalents of US$ have been translated at an exchange rate of £1: $1.41.
Companies: Cadbury, Dr Pepper Snapple Group
