Interest in Cadbury, Danone $1.6B Aussie Asset Sales
Wednesday, 17 September 2008
SYDNEY: A potential A$2 billion ($1.6 billion) in Australian asset sales by Britain's Cadbury Plc and France's Groupe Danone SA is generating solid interest, though current market turmoil may lower bid prices.
Possible trade buyers for the local units include privately owned mineral water and juice firm P&N Beverages, Japanese brewer Kirin's Australian unit National Foods and Coca-Cola Amatil Ltd, which would face competition concerns, according to bankers and analysts.
Danone, which is reviewing its Australian and New Zealand business Frucor Beverages, received about five indicative offers last week, less than one month after the French food group announced the review, several banking sources told Reuters. A shortlist was expected shortly.
"Four or five parties have submitted (indicative bids)," one source familiar with the process said. "It's mostly trade buyers, but some of them are supported by private equity."
But the worsening credit conditions may affect the ability of bidders to raise funds amid market turmoil and could mean bidders are prepared to pay less for the assets.
"I have heard people talking about A$600-A$800 million range," said the source, who declined to be identified as the sale process was private.
UBS values Frucor, which makes Mizone flavoured mineral water, Just Juice, and h2go bottled water and has the Pepsi franchise in New Zealand, at about A$1.08 billion ($857 million) including debt, basead on an estimated net profit for fiscal 2008 of A$404 million.
Meanwhile, Cadbury's likely sale of its Australian beverage unit Schweppes, being managed by UBS, is still some time away as the Australian unit has to separate the beverage and confectionary operations, although work has begun on that.
In July, analysts estimated Schweppes could be worth about $1.2 billion, based on the value of Dr Pepper Snapple, the U.S. beverages business spun off by Cadbury earlier this year.
"We anticipate reporting back to the market in October," when the British parent gives a management update, a Cadbury Schweppes spokeswoman said.
Cadbury Schweppes, whose brands in Australia include Schweppes Lemonade and Tonic Water, Spring Valley, Solo and Fiji Water, is expected to send out sale documents to interested parties over the next couple of months, once the outcome of the review is know in October.
But already, Coca-Cola Amatil has mandated Macquarie Group Ltd to advise on the Cadbury sale. Citigroup has the mandate for advising Coca-Cola on the Frucor sale.
Australia's A$10.3 billion beverage market is dominated by Coca-Cola, with more than 60 percent market share, while Cadbury has a mid-20's percent market.
"Information has been released to selected parties who expressed interest," a person with direct knowledge of the Frucor sale said. "We would be working with the parities over the coming months to see whether something can be done. Danone has not made a decision to sell, it will be dependent upon the offers that they get," he added.
The source declined to be identified as the process was confidential. He said a final outcome of the review would be know in two to three months.
Buyout fund Pacific Equity Partners is widely seen as a front runner to buy Frucor, which it held a stake in before the company was sold to Danone in 2002 for about $120 million.
In addition to knowing the company well, PEP is cashed up, having raised A$4 billion in a new investment fund earlier this year, and runs a similar businesswith another private equity firm. PEP was not available for comment.
Still, trade buyers have advantage.
"Given the synergies that Coke (Coca-Cola Amatil) could generate out of it and the amount they could afford to pay, if Coke gets the regulatory approvals they would probably take it out with the biggest price," said one industry source.
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