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    Cadbury to Acquire Adams

    Trident, Halls cough drops, Certs mints and Clorets to put company in "functional category lead.

    LONDON -- Soft drink and candy company Cadbury Schweppes yesterday reached a deal to buy Adams for $4.2 billion in cash to make it the global joint leader in confectionery and number two in chewing gum.

    The London-based company said the purchase from drug maker Pfizer Inc. Cadbury, with brands such as Dairy Milk chocolate, Trebor mints and Hollywood and Dandy gum, will gain Adams' Trident and Dentyne chewing gums, Bubblicious bubble gum, Halls cough drops, Certs mints and Clorets breath fresheners.

    The deal will make Cadbury the market leader in functional confectionery, such as gums and refreshing products, in which growth is double that of the overall confectionery market, and greater scale in new markets overseas. Functional confectionery purports to offer a health benefit, according to Reuters.

    Analysts praised the deal. "This is a reasonable price, and a good strategic move," analyst Michael Landymore at Investec Securities told Reuters. "The market is comfortable with the kind of savings Cadbury can make."

    Chief Executive John Sunderland said the focus of Adams was on breath fresheners, sore throat remedies and tooth whitening gum that are forecasted to grow strongly. "These functional areas are broadening and increasing all the time. There is great potential on a global basis for this relatively untapped area," he said.

    Pfizer, the world's biggest drugs group, put Adams up for sale in June after a two-year bar on selling it expired following Pfizer's acquisition of Warner Lambert. The auction drew interest from some of the world's top food companies, including Swiss-based Nestle, which makes KitKat chocolate bars, and U.S. group Kraft Foods Inc, which owns chocolate maker Suchard. Sunderland said the deal would make it global confectionery leader alongside Nestle and U.S. privately owned Mars, and increase Cadbury's gum market share to 26 percent from eight percent, just behind world leading chewing gum company Wm. Wrigley Jr. Co. with 31 percent.

    The key to the deal was its four "power" brands -- Halls medicated sweets, Trident sugarfree gum, Dentyne fresh breath gum and Bubbas bubblegum -- the first three being in the area of functional confectionery products, Sunderland added. He pointed out that these functional confectionery products were growing annually at five percent against an overall confectionery market growing at two percent.

    The Cadbury deal will dilute underlying earnings in 2003, but will enhance earnings in 2004 and thereafter, the report said. The deal's valuation represents two times Adams' 2001 sales and 12.8 times 2001 underlying earnings before interest, tax, depreciation and amortization (EBITDA), Cadbury said.

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