Heinz Driver Locks on Cadbury

Cadbury Schweppes – the world’s largest confectioner – yesterday confirmed US activist investor Nelson Peltz had built up a near three per cent stake, sparking talk he wanted to split the company up to unlock value.

Cadbury’s shares soared ten per cent, valuing the group which makes Dairy Milk chocolate, Trident chewing gum and Dr Pepper at nearly pounds 13 billion.

Mr Peltz’s Trian Fund, which bought the stake, has a reputation of buying shares in undervalued groups and pressuring management to perform, as reflected by his stake building and desire for better performance at H.J. Heinz Co.

Analysts expect Peltz to try and drive change from within, cutting costs and looking to split the company between its global confectionery business and soft drinks operations in North America, Mexico and Australia.

“He will clearly look to provoke the board into some sort of break-up, and I imagine the board will resist aggressively,” said food industry analyst David Lang at Investec Securities.

Trian Fund Management was founded in November 2005 by Peltz and partners Peter May and Ed Garden and says it looks to invest in undervalued public companies to create capital appreciation by operational action plans.

Peltz’s Trian built up a 5.5 per cent stake in Heinz last year and his pressure resulted in he and colleague Michael Weinstein winning seats on the board in September.

They have pushed Heinz to cut spending and focus on marketing to consumers.

Peltz’s campaign called on his experience with other companies such as US drinks maker Snapple, which he bought for EUR300 million (pounds 156.2 million) in 1997 and sold to Cadbury for EUR1.5 billion (pounds 781 million) in 2000. He attributed the success of Snapple to intensive marketing.

Cadbury underperformed its Euro peers in 2006 due to a salmonella chocolate recall and a Nigerian accounting scandal, but prospects are better in 2007 as it looks to introduce new products, analysts said.

Cadbury has been subject of speculation in recent months over bid talk from the likes of US-based Kraft Foods or private equity interest, and was prompted to issue the statement after Trian built up its stake.

“In response to market speculation, Cadbury Schweppes confirms that it has been informed by Nelson Peltz that he and certain of his affiliates have interests in 62,465,267 Cadbury Schweppes shares, representing 2.98 per cent of Cadbury Schweppes’ issued share capital,” Cadbury said in a statement.

Shares closed up 57p at 602p.

(c) 2007 Birmingham Post; Birmingham (UK). Provided by ProQuest Information and Learning. All rights Reserved.