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Cadbury Buys Adams Chewing Gum for $4.2B

December 17, 2002

LONDON (AP) _ Cadbury Schweppes PLC announced Tuesday a $4.2 billion deal to buy the Adams chewing gum company of the United States from Pfizer Inc., provoking an immediate downgrading of Cadbury’s credit rating.

The acquisition, Cadbury’s largest to date, secures its position as the No.2 chewing gum manufacturer worldwide and No.1 in North America.

Adams’ brands include Dentyne, Clorets, Certs, Bubblicious and Halls.

Cadbury said it would borrow to finance the acquisition, paying $3.75 billion in cash and $450 million in tax benefits. It said it did not expect the deal to earn a positive return on capital until 2006.

Standard & Poor’s Ratings Services lowered its long-term corporate credit ratings for Cadbury from A to BBB, while Moody’s Investors Service dropped its long-term rating on Cadbury from A2 to Baa2. Fitch Ratings, another credit agency, also reduced its rating on the stock.

Cadbury chief executive John Sunderland told reporters that the company is funding the deal using debt rather than equity because ``if you feel you’re confident about the financial predictability, then it makes sense to leverage that position and it’s in the better interests of holders of equity.″

Sunderland said he expects to have the company’s credit rating back to an ‘A’ rating within four years.


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