Britain's Cadbury Schweppes rejected a private equity bid for its North American drinks unit over the terms rather than price after it was asked to finance a third of the deal, industry sources said on Friday.
A private equity consortium including Blackstone Group , Kohlberg Kravis Roberts and Lion Capital offered Cadbury 6.4 billion to 6.9 billion pounds ($13-14 billion), but wanted Cadbury to be involved in part financing the deal, the sources added.
"The value could have been towards the top of this range, but Cadbury declined more due to the financing rather than the value of the bid," one industry source said.
The world's largest confectionery group said in March it would separate off its Dr Pepper and 7UP unit, and a sale to private equity buyers seemed most likely, until turbulence in the debt markets forced the auction to be delayed in late July.
"We think the biggest issue is that it appears to require vendor financing, which Cadbury have quite rightly rejected in our view," said Panmure Gordon analyst Graham Jones.
The deal would have involved Cadbury taking on a high level of risk and would not have been good value for its shareholders, and the London-based group did not want to be panicked into a deal, the sources added.
Analysts said Cadbury was likely to opt to demerge the business rather than sell or float it after problems in the debt market made private equity bids more difficult to finance for a business which they say is still worth up to 7 billion pounds.
This is 1 billion pounds off top estimates in the early summer when two private equity consortia - one Blackstone-led and the other including Bain Capital Partners, Thomas H. Lee Partners and TPG were vying to buy the unit.
Cadbury, the maker of Dairy Milk and Trident gum, is still committed to separating the drinks business and already reports it as a discontinued business, but it is conducting a twin-track process to assess whether an outright sale or a demerger/ initial public offering (IPO) will prove the best method.
"We believe Cadbury will continue to pursue a dual-track approach for another few months, to give debt markets time to settle down, but that by the end of the year if an acceptable bid is not forthcoming they will press the demerger button," said Jones, adding a share split is more likely than an IPO.
Cadbury shares were off 0.5% at 584 pence in a lower London stock market.