Britain's Cadbury Schweppes said on Friday it was extending the timetable for the sale of its North American drinks business due to the turbulence in debt markets, although it said buying interest was keen.
Industry sources said the auction may be delayed by a matter of weeks but they still expect the business to fetch 7.0 to 7.5 billion pounds ($14.4-15.4 billion), with a private equity consortium the most likely final buyer.
The problems in the debt markets have made it more difficult for private equity groups to borrow from banks, causing problems with the highly leveraged buyouts of Boots in Britain and Chrysler in the United States, and the turmoil spilled over into equity markets on Thursday causing sell-offs in London and New York.
Cadbury shares slumped 5 percent to a low of 559-1/2 pence after Friday's news but steadied to be down just 0.9 percent at 584p by 0815 GMT. The FTSE 100 index was off 0.1 percent.
The stock fell 4.3 percent on Thursday, continuing a slide from a year high of 728p in late May largely reflecting concerns over the sale process.
This is a sensible and expected move, but clearly it draws attention to the risk it may go for a demerger rather than a sale, meaning that Cadbury would not be getting cash, said analyst Rob Mann at brokers Collins Stewart.
PRIVATE EQUITY BIDDERS
Cadbury, the world's biggest confectionery group, said in a statement that the sale process for its North American beverage business is ongoing, and that interest remains strong.
However, the leveraged debt markets have experienced extreme volatility in recent days. As a result, a decision has been taken to extend the sale timetable to allow bidders to complete their proposals against a more stable debt financing market, the group said in a statement.
The auction for Cadbury's Dr Pepper, 7UP and Snapple North American drinks business has boiled down to a two-horse race between three-party private equity consortiums, the sources said.
Blackstone Group, teaming up with Kohlberg Kravis Roberts and Lion Capital, was thought to be the front runner, with a rival private equity grouping including Bain Capital Partners, Thomas H. Lee Partners and TPG also bidding, the sources added.
Originally, final bids for the drinks business had been due on Monday, July 30. Cadbury announces its half-year results on Wednesday, August 1.
Cadbury decided to separate its North American soft drinks business in March soon after U.S. billionaire Nelson Peltz built up a stake in the company, in order to focus on its Dairy Milk chocolate and Trident gum confectionery business.
By June, Chief Executive Todd Stitzer said a sale was more likely than a spin-off as it gave better value to shareholders and said Cadbury intended to return capital to shareholders.
Cadbury's North American beverages employs more than 18,000 people at 24 plants. Last year, it had revenues of nearly 2.6 billion pounds and operating profits of 584 million pounds.