MD writes...

Today the break-up and preparation for sale of a great company continues apace (no doubt inspired by advisors Goldman Sachs) as Cadbury Schweppes announced on 21 November the sale of its European beverages business to a consortium of Blackstone Group and Lion Capital for £1.27bn - barely 10 times operating profits.

This business is more profitable than the main bits of the company (and significantly more so in ROS terms than the dubious Adams gum purchase in December 2003). It is also cash generative, has a better ROA than the US business and appears under-managed: they have singularly failed to exploit the opportunities of the Orangina brand and the Schweppes franchise Cadbury all but gave away in the UK to Coke. In sum, it is a great opportunity for the buyers and another missed chance for shareholders.

Ought Cadbury shareholders to be looking askance at the company's independent Non-Executive Directors (NEDs) in this story? Cadbury have six of them:

1. Wolfgang Berndt
2. Rick Braddock
3. Roger Carr
4. David Thompson
5. Rosemary Thorne
6. Baroness Wilcox

NEDs are there in the main to protect shareholders interests. It would be interesting to hear their side of the argument in going along with this deal [Editor: this site is systematically scanned by the press offices of the larger companies mentioned so who knows]. That is, after all, what their fees are for. Cadbury NED fees range from £45k to £90k before any supplements, at least half of which end up in the form of Cadbury shares (details on page 9 at this link).

Nice, but does such a deal engender the same level of NED commitment to shareholders as having NEDs buy-in from the start with their own cash? To those who doubt it, it comes as little surprise that business deals such as this sail through with little, it seems, difficulty at firms with NED fee structures similar to that of the aforementioned. Is it any wonder that so many "independent" directors are held in low esteem?

Perhaps this is harsh on the Cadbury NEDs - note to the CBRY press office: right of reply guaranteed.

[Editor: The online spellchecker suggests "cadaver" as an alternative to "Cadbury". They aren't there yet, surely?]

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