Cott confirms merger talks

Cott confirms merger talks

	Published : Sat, 14 Apr 2007 01:18 By : Agencies Print this Story

TORONTO (AP) - Canada's Cott Corp. confirmed Friday it's in talks with interested parties in merging with the beverage arm of Cadbury Schweppes, which would create a stronger rival to Coca-Cola and Pepsi.

Cott makes private-label soft drinks for retailers like Wal-Mart Stores Inc. Cadbury Schweppes PLC announced plans to split its drinks and candy operations this summer.

Cadbury's drinks business is expected to be valued at as much as $15.8 billion.

'Following the recent announcement by Cadbury Schweppes PLC regarding the separation of its confectionery and Americas Beverage business, Cott has responded to interested parties that have approached the company, and is exploring the potential benefits of participating in possible industry consolidation,' Cott said in a statement.

'While the board of directors of Cott is supportive of these exploratory discussions, there has been no decision regarding a change in strategy,' the company said.

The Cadbury Schweppes bottling group has 9,000 employees and 10 factories in the United States, making products including Sunkist, Canada Dry and A&W root beer, in addition to Dr Pepper and 7Up.

A merger of Cadbury Schweppes beverages with Toronto-headquartered Cott -- already the world's third-largest maker of carbonated soft drinks -- would appear to create a more significant rival for Coke and Pepsi.

But a U.K.-based beverage consultant raised questions about how operations outside North America would dovetail.

'They would not immediately appear to be an automatically natural fit,' said Richard Hall, chairman of Zenith International, a European food and beverage consulting firm.

'The contrasts are greater than the synergies, other than in North America itself and possibly Mexico. It all depends on the price. At a premium price, I would have thought the complications outweigh the synergies.'

Hall said Cadbury Schweppes drinks are marketed as strong brands, and the company has divested almost all its beverage holdings outside North America. In contrast, Cott manufactures store-brand drinks and is seeking to expand outside North America, with significant operations in Britain and potential forays into the burgeoning Chinese market.

Hall also noted that the potential synergies would be in the carbonated drinks sector, which is in decline.

'Neither company has particular strengths in water, juice, sports and energy drinks, which are the faster-growing area of the market,' Hall said.

The Cadbury Schweppes drinks are not colas that compete directly with Coke and Pepsi, while Cott makes discounted imitations aimed straight at Coke and Pepsi drinkers.

Cott has been closing factories and restructuring to reduce costs amid falling demand for carbonated soft drinks.

In February, it reported a fourth-quarter net loss of $29.6 million compared with a year-earlier loss of $6.9 million, as sales declined 1.4 per cent excluding foreign-exchange effects.