€1.75bn Coca-Cola acquisition deal to be renegotiated

Threats by competition regulators in several countries to block Coca-Cola's $1.85 billion (€1.75 billion) acquisition of the non-US soft drink arm of Cadbury Schweppes have forced the companies to renegotiate the deal to exclude most of western Europe. However the sale will still go ahead in Ireland.

Cadbury will now keep its soft drinks operations in Norway and Switzerland, as well as those in EU states other than Britain, Ireland and Greece.

Coca-Cola will continue with plans to acquire drinks such as Dr Pepper, Seven-Up, Canada Dry and Schweppes in more than 100 other countries worldwide - but at a reduced price of $1.1 billion.

The separate sale of Cadbury's bottling operations in Europe and other leading markets - expected to raise another £500 million pounds sterling (€753.92 million) - has been put on hold.

"The adjustments remove uncertainty for our employees, bottlers and shareowners and ensure a swifter conclusion to the transaction," said Mr John Sunderland, Cadbury chief executive.

The deal was announced in December but has been blocked in several countries, including Australia, Belgium and Mexico, the largest soft drinks market outside the US. The EU's competition watchdog threatened Coca-Cola with heavy fines for not submitting its proposed acquisition to Brussels for scrutiny.

The agreement is not subject to regulatory approval in most of the countries it now covers and is expected to be completed in them by the end of July. Payment of about half the $1.1 billion will be made then.

Approval is still needed in a few countries including Mexico, the UK and Australia, where the regulator is expected to reject a compromise deal submitted last month. The two companies hope to have the approvals completed by the end of the year, with payment on a country-by-country basis.

"They've got to fight their way through Mexico and Australia if another big bit of the deal is not to disappear," said Mr David Lang, analyst at Investec Henderson Crosthwaite.

The European countries remaining with Cadbury produced trading profit of £35 million sterling in 1998 on sales of £338 million sterling. Profit is growing at 15 per cent a year, but the margin at 10.4 per cent is below the British group's 19.4 per cent in its North American drinks business.

Coca-Cola said it had no plans to acquire the European operations at a later date.

Cadbury is bitter at the failure of the British authorities to give the go-ahead, since the two groups' drinks are already distributed by a single company - CocaCola Schweppes Beverages.

Cadbury shares fell two-and-a-half pence sterling to 429.5 pence sterling.