LONDON - Cadbury Schweppes PLC agreed yesterday to buy Triarc Cos.' Snapple juices and iced teas for $1.45 billion to add noncarbonated beverages to its Dr Pepper, 7 UP and other soft drinks, making the third time in less than six years that Snapple has been sold.
Cadbury will pay $910 million in cash and borrow from banks for the acquisition. It also will pay $120 million for employee options and assume $420 million in Triarc debt.
Cadbury wants beverages with faster-growing U.S. sales than its carbonated drinks. Profit has been lackluster at its confectionery unit, which makes such products as Dairy Milk chocolate bars and York peppermint patties. Snapple sells more than 50 flavored drinks and has 28 percent of the U.S. premium-beverages market, Cadbury said.
"It's a good acquisition," said Arnaud Langlois, an analyst at J. P. Morgan Securities in Paris, who has a "buy" rating on Cadbury. "They have a very good opportunity here to strengthen their position in the U.S. drinks market."
Cadbury shares rose 9.75 pence to 390p, after rising as much as 6.5 percent. New York-based Triarc rose 75 cents to $25 on the New York Stock Exchange. It has risen 36 percent this year.
Cadbury will spend another $200 million to compensate Triarc for U.S. taxes, said Cadbury spokeswoman Dora McCabe. Triarc, led by Chief Executive Officer Nelson Peltz and Chief Operating Officer Peter May, revitalized Snapple after buying it from Quaker Oats Co. in May 1997 for $300 million. Quaker paid $1.7 billion for Snapple and took a $1.4 billion charge for it.
Peltz and May, who own about 30 percent of Triarc, paid $71.8 million for their initial 23.1 percent stake in 1992. They made their fortunes in the 1980s, buying and selling companies with backing by Michael Milken and Drexel Burnham Lambert Inc.
Analysts and industry consultants credit Mike Weinstein, chief executive of Triarc's beverage unit, with turning around Snapple's sales. In 1999, Snapple's sales rose 5 percent to $772 million while earnings before interest and taxes increased 13 percent to $81 million. Weinstein will remain CEO of Snapple Beverages Group, Cadbury said.
Quaker's purchase of Snapple in December 1994 was followed by losses for the cereal maker, as competitors' teas and fruit juices cut into sales. Revenue fell 22 percent during Quaker's regime.
"For Cadbury, the key will be continued innovation and to step up the level of investment if it wants to continue to grow Snapple," said Bill Pecoriello, a Sanford C. Bernstein & Co. analyst. He said about 50 percent of the soft-drink industry's growth will come from noncarbonated drinks.
U.S. soft drinks comprised one- third of London-based Cadbury's $2.7 billion in sales in the first half of this year. Almost all of Snapple's sales are in the United States and Canada, Cadbury said.
Cadbury, whose other U.S. beverage brands include Crush and Sunkist, said it expects $10 million to $15 million in annual cost savings, rising to $50 million during the third year. The company, which plans to complete the purchase in November, said it expects the transaction to boost earnings the first year.