Cott Shares Surge After Company Shows Interest In Merger


Private-label drinks maker Cott said it has responded to interested parties that have approached it after Cadbury Schweppes announced it would split its confectionery and Americas beverage businesses.

The news sent Cott's stock surging as much as 30% .

The company said in a statement it is exploring the potential benefits of "participating in possible industry consolidation", but fell short of revealing the identity of the parties with which it is in discussions.

Shares of Cott were halted before the bell on Friday morning on both Toronto and New York bourses after the Wall Street Journal said the company was in talks with private equity firms about merging operations with Cadbury Schweppes' beverage arm.

Toronto-based Cott, which is consulting with legal and financial advisors, said its board supports talks on a potential transaction, but there has been no decision regarding a change in strategy.

Citing a person familiar with the talks, the Wall Street Journal said several private equity firms were considering a bid for Cadbury Schweppes brands, which include 7 Up, Dr. Pepper and Snapple.

Cott has a market value of less than $1 billion, while Cadbury's beverages unit is worth around 8 billion pounds ($15.9 billion).

A combination of Toronto-based Cott -- which bottles beverages for Wal-Mart Stores and other major retailers -- and Cadbury's beverage arm would create a robust competitor to Coca-Cola and PepsiCo.

Cadbury Schweppes is the No. 3 soft drink company in the United States, behind Coca-Cola and Pepsi.

According to 2006 data from industry publication Beverage Digest, Cadbury and Cott together would control about 20% of the U.S. market.

Coke and Pepsi together control about three-quarters of the market, which in 2006 was 10.16 billion cases, according to Beverage Digest.

Shares in Cadbury Schweppes surged almost 5% in London after Cott shares were halted and interest in Cadbury's beverage unit by private equity groups grew.

The London-based firm's shares rose as high as 700 pence to top the FTSE 100 gainers on Friday before closing up 1.7%, at 678 pence.

Sources close to the situation have said Cadbury has signed confidentially agreements with a number of private equity players interested in buying its beverage business, which is based in the United States, and that the company plans to give financial details in the coming weeks.