Reports outline strong interest in Frucor and Schweppes

Posted by Daniel Palmer on 18th September 2008

Reports suggest that strong interest has been generated in both the potential sales of Cadbury’s Australian beverage division and Frucor – owned by Danone.

Companies consistently linked to bids have included P&N Beverages, Coca-Cola Amatil and National Foods, although competition concerns could play  a factor in the process, with Coca-Cola Amatil likely to be the most heavily scrutinised by the ACCC – according to analysts.

Groupe Danone reported at the end of August that a review of their New Zealand and Australian beverage subsidiary Frucor would take place, but are yet to formally announce that the business is up for sale. Banking sources have informed Reuters that around five indicative offers have been received and this will be reduced to a shortlist in the near future. Cadbury announced a review of their Australian beverage division in late July, with further details to be provided in their Interim Management Statement in October.

Reuters noted that UBS analysts value Frucor at around $1 billion, with the beverage arm of Cadbury Schweppes valued above $1 billion – although the credit crunch might limit the potential sale price.

Frucor is widely renowned for their ‘V’ energy drink – a market leader in Australia and New Zealand. They also sell a range of water and juice brands and bottle and distribute Pepsi products in New Zealand. The possible sale of Schweppes and Frucor presents a conundrum for Pepsi, with Schweppes the bottler for Pepsi within Australia. The Australian Financial Review suggested a fortnight ago that Pepsi has held talks with a range of companies to sound out new bottlers.

Reuters report that Coca-Cola Amatil has called on Macquarie Group Ltd to advise on the potential Cadbury sale and Citigroup for the possible Frucor sale. Analysts believe competition issues will stand in the way of Coca-Cola, which failed in their attempt to purchase Schweppes a decade ago after being blocked by the ACCC. The competition issues are likely to be looked at very closely by the competition watchdogs in both Australia and New Zealand, and speculation remains strong that Coca-Cola may instead simply lodge a bid for the ‘V’ brand.

The ACCC is currently monitoring the situations of both Frucor and Schweppes.