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A bittersweet split?

A billionaire investor nudged Cadbury Schweppes to divide into two businesses.

LONDON - Cadbury Schweppes PLC announced plans Thursday to split itself in two, separating its confectionery and soft drinks businesses, as it apparently bowed to pressure from investors led by U.S. billionaire Nelson Peltz.

The company intends to spin off its U.S. beverages arm, which makes products including Snapple and Dr. Pepper, from the rest of Cadbury, leaving its confectionery business, which has products such as Dairy Milk chocolate and Trident gum.

The market reacted positively, with Cadbury shares rising 3 percent to close at 620 pence ($12) on the London Stock Exchange.

The announcement comes just days after Cadbury revealed that Peltz's Trian Fund Management had taken an almost 3 percent stake in the company.

Peltz has a record as a shareholder activist, buying up stock in companies he sees as undervalued then agitating for change from within. Last year he took a 5.5 percent stake in ketchupmaker H.J. Heinz Co. and subsequently won a seat on the U.S. company's board after a bitter proxy battle.

Analysts speculated earlier this week that he had a similar plan for Cadbury, where he advocated splitting the confectionery and soft drinks business.

Todd Stitzer, Cadbury's chief executive, said Thursday's announcement was the "culmination of a process that's extended over two to three years," but he also acknowledged that recent press speculation about Peltz's intentions had influenced the timing of the announcement.

In a statement, Trian said the plan would benefit shareholders because it has "two strong businesses with the size and scale to thrive independently."

The company had been under increasing pressure to revert to its origins as a confectionery company by spinning off the U.S. drinks business, particularly after it sold its European soft-drink unit to a private-equity consortium in 2005.

Stitzer said separating the business will allow for greater focus on revenue growth and increasing margins.

Cadbury's confectionery business accounts for around 60 percent of the group's revenue, with the beverage business making up the rest.

"In the end, it looks as though market forces have won the day and valuation considerations have triumphed over distribution synergies," said Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers.

Stitzer, who ran the beverages business himself in the late 1990s, said the company had received no approaches yet for either business. He added that he had no intention of leaving Cadbury after the split and was confident the confectionery company will remain independent, despite suggestions it would be exposed to a bid as a standalone company.

[Last modified March 15, 2007, 23:09:02]