Cadbury to split between sweets and drinks: BBC

LONDON (Reuters) - Britain's Cadbury Schweppes Plc plans to split itself into two separate businesses focusing on chocolate and confectionery on the one hand and U.S. soft drinks on the other, the BBC reported on Wednesday.

In an unsourced report on its Web site, the BBC said an announcement on the split could come as soon as Thursday, and would dramatically increase the group's value.

The Cadbury board met on Wednesday and agreed on the split which will give existing shareholders shares in two new groups, one focusing on its Dairy Milk chocolate and Trident gum side and the other its Dr Pepper drinks business, the BBC said.

At the same time, the Times said private equity groups Lion Capital and Blackstone were considering a possible 6.5 billion pound ($12.51 billion) bid for the drinks arm.

The private equity pair clubbed together to buy Cadbury's European Orangina and Schweppes soft drinks business for 1.85 billion euros in a deal that was completed in February 2006.

Lion Capital and Blackstone were understood to have expressed their interest in the rest of the drinks unit but their plans were in the preliminary stages, the Times reported, without citing sources.

Cadbury, the world's biggest confectionery group, revealed on Tuesday that U.S. activist investor Nelson Peltz had taken a 2.98 percent stake in the group, and analysts said Peltz would pressure Cadbury to split itself into two to unlock value.

Peltz's Trian Fund built up a 5.5 percent stake in U.S. food group H.J. Heinz Co. last year and he pressured the company to give his fund two seats on the Heinz board and pushed through changes which have boosted the share price.

Analysts said Cadbury's confectionery side could be worth around 9 billion pounds ($17.3 billion) as a separate entity and the drinks business around 7 billion pounds, compared to the group's current value of 12.6 billion pounds, the BBC reported.

If all goes to plan Cadbury shareholders will own two shares for every one they currently hold, one in the confectionery business and the other in the soft drinks unit. However, preparations for the break-up will take time and the demerger may not be completed until the autumn, the BBC said.

News of Peltz's stake sent Cadbury's shares up over 10 percent on Tuesday on hopes of unlocking value within the group, but only late last October Cadbury Chief Executive Todd Stitzer said he was ruling out a demerger of the group.

Cadbury's share closed on Wednesday at 602 pence on a day when the London stock market fell sharply.

Cadbury was not available for comment.