Regulatory News Service

Cadbury Schweppes plc has entered into an agreement with The Carlyle Group of Washington DC to establish a joint venture to invest in soft drinks bottling in the US. The new joint venture company, The American Bottling Company, will acquire the two leading independent bottling groups in the MidWest, Beverage America and Select Beverages, for a total cash consideration of $724 million (#441m).

Cadbury Schweppes plc will own 40% of the equity of The American Bottling Company with the balance owned by The Carlyle Group. The funding of the joint venture will be $300 million (#183m) of equity and the balance in external bank debt. Cadbury Schweppes' share of the equity is $120 million (#73m) which will be provided from the Group's existing resources. The acquisitions are expected to enhance earnings in 1999 (excluding amortization costs).

Commenting on the agreement, John Sunderland, Chief Executive of Cadbury Schweppes, said, "Today's announcement emphasizes our commitment to reinforcing our route-to-market for 7 UP and our other flavour brands in the US soft drinks market. It is also a significant step in consolidating and strengthening the independent Bottling System. At the same time the joint venture approach enables us to improve the strategic alignment between Dr Pepper/Seven Up and its key bottlers in a manner which limits our capital investment, underlines our strategy to remain primarily a franchisor and is entirely consistent with our drive to create shareholder value."

Beverage America and Select Beverages currently bottle and distribute 30% of Dr Pepper/Seven Up (DPSU) volume in the Independent Bottling System (IBS). In addition to Dr Pepper and Schweppes, key brands include 7 UP and the flavour brands portfolio — Canada Dry, Sunkist, A&W and Squirt. In total, 44% of DPSU's volume in the US is franchised through the IBS. Other important brands bottled and distributed by these bottlers include Royal Crown, Mistic, Snapple, Hawaiian Punch and Evian.

In the year to December 1997, Beverage America and Select Beverages reported combined operating profits of $61 million (#38m) and combined net assets of $118 million (#72m). Beverage America's main headquarters are in Holland, Michigan and Select Beverages' in Chicago, Illinois. Beverage America and Select Beverages have nine manufacturing facilities and 5,000 employees.

Cadbury Schweppes' partner, The Carlyle Group, is a leading US investment firm with extensive experience of corporate joint ventures in a wide range of industries. It has $2.5 billion in equity available for investment in the US and Europe.

William E. Conway, Jr., Carlyle Managing Director, said, "The Carlyle Group is delighted to be a partner in the creation of The American Bottling Company. We regard Cadbury Schweppes as a world class company and we are excited about working together to build value for our partner and ourselves."

Both shareholders will be represented equally on the Board of The American Bottling Company, which will be managed separately from Cadbury Schweppes' existing soft drinks operations in the US. The acquisitions are expected to close by the end of March 1998 when details of the management appointments will be announced.

© 1998