Cadbury to buy Turkey’s Intergum for $450 mln

LONDON (Reuters) – Britain’s Cadbury Schweppes Plc said yesterday it is buying Intergum, a Turkish gum business, for $450 million in cash and debt which will help it close the gap on industry leader William Wrigley Jr Co. Cadbury, the world’s largest confectionery company and maker of Dairy Milk chocolate and Trident gum, said the deal will make it No 1 in the Turkish gum market, which grew 17 percent last year, while it already has the top share in the candy market. Intergum, owned by the Amram family, has a 46 percent share of the Turkish gum market to add to Cadbury’s existing 10 percent share, while Cadbury has over 60 percent of the candy, or sugar confectionery, market but no presence in chocolate. Intergum had group sales of $109 million in 2006. Cadbury is the leading emerging market player among the world’s top confectionery groups, with 70 percent of its growth last year coming from these markets, while gum accounts for one-third of its sweets revenue, which grew 10 percent in 2006. Turkey is a key area for Cadbury as it is a manufacturing base for supplying some European markets, and analysts said Cadbury was keen to expand there to prevent any move by its Chicago-based arch chewing gum rival Wrigley. Broker Cazenove said the rich multiple paid of 25 times enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) for the bolt-on acquisition was justified, as it estimated annual cost savings of -4.4 million on operating profits (EBIT) of -13.3 million. Cadbury is in the process of selling off its Dr Pepper and 7UP North American soft drinks business in an auction dominated by private equity players to become a pure confectionery player like US rivals Wrigley and Hershey Co. It will announce a new confectionery strategy on June 19 which sources close to the situation say will trim around -300 million off its annual costs as it prepares to sell off its soft drinks unit, worth up to -11 billion. The cuts involve Cadbury moving out of its expensive central London office and analysts expect it to lead to factory closures among Cadbury’s 60 worldwide confectionery plants and reduce its global sweets work force of around 50,000.

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