Merger Should Have Little Effect Here

Press, Volume CIX, Issue 31904, 4 February 1969, Page 18

Merger Should Have Little Effect Here

(By the Commercial Editor) The planned merger between the two big British food companies— Schweppes and Cadburys—should have little effect on the operations of either group’s New Zealand subsidiaries, at least in the immediate future.

The merger, if it is not prevented by the Board of Trade, will be achieved by the exchange of 15 Schweppes shares for four of Cadburys, and the two companies will be equal partners in the new group. Combined world turnover of about £26om ($555m) should make Cadbury-Sch-weppes, Ltd, one of the biggest food combines in the world. Both boards have recommended the merger to their shareholders. “Good Mixing” Commentators .have noted that Schweppes is practising what it preaches—“the art of good mixing.” The combination of one of the world’s leading soft-drink companies and one of the biggest chocolate groups seems a natural part of the rash of take-overs of the late 19605. Schweppes has grocery lines as well as soft drink, and Cadburys' has cake as well as confectionery interests, so the new group should gain as much strength from its breadth as from its size. The companies already have considerable interests in North America and Europe,

in addition to their Australian subsidiaries. Although the merger of the parent companies is expected to have little immediate effect on operations in New Zealand or Australia, it must increase their market strength, especially when the group is restructured in 1970, after Cadbury, Fry, Pascall becomes publicly listed in Ausitralia, and its preference shares are exchanged for ordinary stock. The Australian interests of both Schweppes and Cadburys are already large. Biggest In N.Z. Cadbury, Fry, Hudson, the Dunedin-based Cadbury subsidiary formed after the war by the acquisition of J. W. Hudson, Ltd, is New Zealand’s largest choclate maker. The trend in the confectionery business at present is towards chocolate, rather than boiled sweets, in which Cadburys is less prominent. Its biscuit division is significant in New Zealand, and a new factory was opened in Papakura three years ago to complement the Dimedin plant. The company is also the main cocoa producer in the country. In Australia, Cadbury, Fry, Pascall hold about 45 per cent of the chocolate and confectionery market and has recently followed its British parent into cake. Although a private company, it has three times the assests of Schweppes Australia at about s4om, and is easily the biggest company in its field. Huge Group Schweppes New Zealand, which is 51 per cent owned by its Australian associate, is part of the huge Aucklandbased Oasis group of softdrink makers. New Zealand Breweries and Innes Industries, a subsidiary of L. D. Nathan, Ltd, hold the other 49 per cent between them. The three companies associated tn the Oasis group are Schweppes itself, Innes Tartan, the maker of Lemon and Paeroa, and the Northern Bottling Company, which holds the Coca Cola and Fanta franchises.

Schweppes owns half of Innes Tartan and a significant share of the Northern Bottling Company. Contract Bottlers, Ltd, which is owned by Schweppes and Innes Industries, bottles Schweppes and Innes Tartan products, while the Northern Bottling Company has its own bottling plant. All members of the Oasis group have franchised bottlers throughout New Zealand, and would dominate the industry in New Zealand. Although turnover figures are not available, it is thought that Ballins Industries, Ltd, of Christchurch, which has financial connections with New Zealand Breweries and McWilliams Industries, Ltd, would be the nearest rival to the Oasis group.

Many Plants In Australia, Schweppes has 11 plants in addition to its New Zealand interest. Coca Cola probably outsells Schweppes, but several separate companies hold Coca Cola franchises, and Schweppes is the biggest softdrink maker in the country. The complex associations of both Cadbury’s and Schweppes’ interests in Australasia should delay any effect from the British merger proposed. The large interests of each company in areas where the other does not operate, and the fact that Schweppes Australia’s ordinary shares are the only stock listed in this part of the world, are other factors making for a delay.

New Structure A merged group might decide not to alter the structure of the companies until the s4m worth of Cadbury preference shares held in Australia are converted next year. After that, it is likely that a new holding company will be formed to absorb the Australasian interests of both Schweppes and Cadburys. Alternatively, and perhaps more likely if the raising of local capital is envisaged in the future, separate holding companies may be formed in New Zealand and AustraliaPublic relations factors could argue for a “take-over” proposal by Schweppes Australia, but in New Zealand the holding company method seems the more likely.