17 December 2002
Cadbury swallows Adams gum for $4.2B
London – Britain's Cadbury Schweppes said Tuesday it has agreed to buy Pfizer's Adams confectionery business – maker of Dentyne, Trident and Bubblicious gums – for $4.2 billion (£2.7 billion) in cash.
The deal makes Cadbury, which owns the Dairy Milk chocolate, Trebor mints and Dandy gum brands, the second-biggest chewing gum maker in the world with a 26% market share.
Pharmaceutical giant Pfizer put Adams up for sale in June after a two-year bar on selling it expired following Pfizer's acquisition of Warner Lambert. Pfizer said it wanted to focus on developing new medicines and acquisition of rival Pharmacia Corp.
Sources said Cadbury outbid the biggest chewing gum maker, Wrigley, Kraft, and Nestle, among others. Adams also makes Halls cough drops, Certs mints and Clorets breath fresheners.
Cadbury Schweppes' board said the all-cash deal includes a $450 million value for expected tax benefits. The net consideration of $3.75 billion represents a multiple of 2.0 times 2001 sales and 12.8 times 2001 underlying earnings before interest, taxes, depreciation and amortization (EBITDA).
The acquisition manufacturing facilities and international sales, distribution and support networks.
Officials said the acquisition is conditional on Cadbury Schweppes' shareholder and regulatory approvals. It is expected to complete by mid-April 2003.
Adams 2001 net sales totaled $1.9 billion in 70 countries. Its brands include four "power" brands - Halls, Trident, Dentyne/Dentyne Ice, and the "Bubbas" range – as well as a range of strong established regional and local brands – Clorets, Chiclets and Certs. Over 70% of Adams' sales are accounted for by the four "power" brands.
In total Adams has 22 factories in 19 countries, 11,586 permanent employees and a further 2,844 temporary employees spread across 40 countries. Adams has one central and 10 local/regional research & development facilities.
North, Central and South America accounted for 75% of Adams 2001 sales. It has an established presence in a number of developing markets, principally Latin America, which accounted for around 40% of 2001 sales.
Adams is said to have a 25% share of the "functional" confectionery products market. "Functional" combines confectionery eating characteristics with a benefit such as relief for a sore throat, nasal congestion, fresh breath or dental care. Targeted primarily at adult consumers, functional confectionery is considered to be the fastest growing part of the confectionery market.
Between 1998 and 2001, functional confectionery volumes grew at an average rate of 5% per annum which compares with 2% for the confectionery market as a whole.
"Adams gives us confectionery market leadership and a unique portfolio with an offering in every confectionery category," said John Sunderland, CEO of Cadbury Schweppes. "It brings powerful brands, access to new geographies and significant scale in the fastest growing confectionery sectors. Cost and revenue synergies, and the opportunity to drive the business within a global confectionery group, will create significant value for our shareowners."
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