Shares digital

Confectionery giant Cadbury Schweppes (CBRY) has confounded the sceptics and succeeded in funding the demerger of the US beverages business. This will be the subject of an EGM on 11 April, and will become effective at the beginning of May. Analysts are becoming more optimistic that without the beverages arm the Cadbury business could attract a bid, with Kraft, Hershey or a Wrigley/Nestlé consortium all thought to be potential suitors.

Kraft owns Suchard, which would complement Cadbury well, as it is particularly strong in European markets where Cadbury is weak.

Similarly, a Wrigley/Nestlé consortium would be a neat fit, as Wrigley could acquire the chocolate business while Nestlé would want the chewing gum operations.

Hershey however is in a weak position to mount a bid, in the short term at least, because of difficulties in the US, but it has historically shown an interest in entering the UK market. David Hallam of Evolution is forecasting 2008 EPS of 35.6p rising to some 39.5p next year placing the shares on a PE of 15.4 falling to 13.9. He has a target price of 650p some 15% above their current 552.5p level.

Shares says: The beverage demerger puts it in a much stronger position and could attract a bid.

by: John Marshall