Cadbury set to buy Orangina from Pernod

Paris, June 6: FRENCH drinks group PernodRicard on Wednesday said it was close to selling the country’s second-biggest soft drinks brand, Orangina, to Cadbury Schweppes in a 700 million euros ($593 million) deal.

The deal, if approved by regulators and Orangina’s workers, would leave Pernod to focus on its spirits business after its recent buy of almost half of Seagram’s drinks unit. It would double Cadbury’s share of the French soft drinks market to 19 percent. Shares in Pernod leapt to a record high on the news and Cadbury stock rose more than one percent. By 0930 GMT, Pernod was nearly three percent up at 83.80 euros and Cadbury was 4-1/2 pence firmer at 466-1/2P.

“The price and rationale of the deal for Cadbury are good,” said Mr Warren Ackerman at Dresdner Kleinwort Wasserstein.

Analysts added the deal would leave Pernod to focus on its core spirits and wines business, while for Cadbury, it remained to be seen how quickly it can develop Orangina around the world, especially in the US, as well as into the retail trade, rather than primarily the hotel and restaurant area. Pernod is to become the world’s third largest spirits group once the Seagram acquisition is approved. Cadbury ranks third in global soft drinks behind Coca Cola Co and PepsiCo Inc, and Orangina will not change that pecking order.

Cadbury and Pernod have been in exclusive talks since last September, after Pernod’s agreed sale of Orangina to Coca-Cola was blocked by French competition authorities. This deal, which will also require regulatory approval, involves the group’s Orangina, Pampryl and Yoo-Hoo brands and related businesses in continental Europe, North America and Australia, Pernod said in a statement. “I am confident that within the Cadbury Schweppes group...these prestigious brands will find new opportunities to shine,” Pernod Chairman Patrick Ricard said.

Pernod bought Seagram’s wines and spirits businesses in partnership with Britain’s Diageo last December, when Seagram merged with France’s Vivendi. Cadbury Schweppes said the Orangina deal would enhance its earnings per share in the first year and that it saw significant synergies following the purchase, but declined to quantify them. The 700-million euros deal included “very little acquired debt”.

The purchase would make Cadbury the second-biggest soft drinks business in France but still a long way behind Coca-Cola. Cadbury said it also wanted to further expand Orangina outside France, particularly in the Mediterranean and the US.

The deal — important to Pernod because it needs the cash to help cover the $3.15 billion it shelled out for 39 percent of Seagram — also gives Pernod the option to sell its remaining soft drinks businesses to Cadbury in the rest of the world. These businesses account for only five percent of Pernod’s total soft drinks profits, and Cadbury said the option, which expires “in about three years”, did not mean it wanted to expand its soft drinks businesses outside its core markets. Only a few years ago, Cadbury sold its soft drinks businesses outside North America, continental Europe and Australia to Coca Cola, in a move to focus on confectionery acquisitions but there have been few opportunities there.

-- Reuters