Cadbury Schweppes Signs Letter Of Intent To Sell Its 51% Interest In The Coca-Cola & Schweppes Beverages Operations To Coca-Cola Enterprises.

LONDON--(BUSINESS WIRE)--June 4, 1996--Cadbury Schweppes plc (NYSE: CSG) announced today that it has signed a Letter of Intent with Coca- Cola Enterprises Inc. ("CCE") for the sale of its 51% interest in the Coca-Cola & Schweppes Beverages ("CCSB") operations. CCSB is the bottling and distribution company for Cadbury Schweppes' and The Coca-Cola Company's brands in Great Britain.

The key elements included in the Letter of Intent, which is non- binding and subject to the agreement of definitive contracts, are:

- Cadbury Schweppes to sell its 51% interest in the CCSB operations to CCE for 620 million pounds sterling.

- Cadbury Schweppes and CCE to sign a new 15 year licensing agreement to cover the bottling and distribution of Cadbury Schweppes' soft drinks brands in Great Britain, with the following principal features:

- Cadbury Schweppes to receive an enhanced concentrate contribution of 11 million pounds sterling per year for 15 years;

- CCE and Cadbury Schweppes have agreed performance criteria and continuing marketing support levels for Cadbury Schweppes' key brands;

- CCE has agreed exclusivity arrangements for Cadbury Schweppes' key brands; and

- Cadbury Schweppes to provide additional marketing and transition support of around 10 million pounds sterling per year for the next four years.

A Letter of Intent for the sale by The Coca-Cola Company of its 49% interest in the CCSB operations to CCE has also been signed.

Dominic Cadbury, Cadbury Schweppes' Chairman, said today, "The proposed sale of our 51% interest in CCSB confirms that the primary focus of our Beverages Stream strategy is to exploit the strength and earning power of our international brand portfolio. The future licensing agreement with CCE provides the long-term security for our brands and the commitment to their growth that we believe we need in the British market. The deal thus allows us to realize funds hitherto tied up in bottling assets and devote them to our primary purpose - the growth of our branded business worldwide."

Completion of the transaction will also be subject to Board and other approvals. Further details follow.

Introduction

Cadbury Schweppes plc ("Cadbury Schweppes") has signed a Letter of Intent, which is non-binding and subject to the agreement of definitive contracts, with Coca-Cola Enterprises Inc. ("CCE") for the sale of its 51% interest in the Coca-Cola & Schweppes Beverages ("CCSB") operations to CCE for a consideration of 620 million pounds sterling (the "Disposal"). In addition, Cadbury Schweppes and CCE have agreed licensing arrangements setting out the basis on which CCSB will continue to bottle and distribute Cadbury Schweppes' brands in Great Britain following the Disposal.

The Coca-Cola Company ("Coca-Cola") has also signed a Letter of Intent with CCE to sell its 49% interest in CCSB operations to CCE.

Background to and Reasons for the Disposal

Cadbury Schweppes' Beverages Stream strategy is to exploit the size, power and potential of its international brand portfolio, while ensuring effective distribution for its brands within each discrete geographical market.

The CCSB joint venture was set up in 1987 by Cadbury Schweppes and Coca-Cola with the aim of protecting and developing the distribution system for their brands in Great Britain. Since then, CCSB has grown rapidly to a position of strength within the British soft drinks market.

Following an approach from CCE, Cadbury Schweppes considers that now is an opportune moment to realize its investment in the CCSB bottling assets. Cadbury Schweppes believes that the 15 year licensing agreement to be entered into with CCE will provide appropriate long-term security and growth commitment for the company's beverages brands in Great Britain.

Terms of the Disposal

Under the terms of the Letter of Intent, 51% of the CCSB operations will be acquired by CCE, or a wholly owned subsidiary of CCE. The consideration payable on the Disposal will be 620 million pounds sterling in cash. The parties may negotiate to phase part of the consideration and interest would be payable to Cadbury Schweppes on any such deferred payments.

Cadbury Schweppes and CCE have agreed that the name "Coca-Cola & Schweppes Beverages Limited" or such other name including the word "Schweppes" as may be agreed, will be used as the legal and trading name of CCSB for the duration of the licensing agreements.

Licensing Agreements

On completion of the Disposal, Cadbury Schweppes and CCE will enter into a series of licensing agreements (the "Licensing Agreements") which will govern the ongoing relationship between the two parties in Great Britain for the bottling and distribution of Cadbury Schweppes' brands. The following are the key terms of those agreements:

i) The Licensing Agreements to last for an initial period of 15 years, with an automatic extension of 10 years unless 12 months' notice is given by either party before the end of the initial period;

ii) Revised arrangements for concentrate supplies to enhance the contribution to Cadbury Schweppes by 11 million pounds sterling per year for 15 years;

iii) CCE not to manufacture, sell, distribute or be otherwise concerned with products which compete with the following brands: Schweppes mixers, Dr Pepper, Oasis, Canada Dry, Rose's, Kia-Ora and Sunkist (except that Coca-Cola's brands Fruitopia and Fanta will be permitted);

iv) CCE to give two years' notice of any intention to discontinue distribution of a major brand (Schweppes mixers, Dr Pepper, Sunkist, Malvern and Oasis) and one year's notice for other Schweppes products. Furthermore, CCE to be required to make compensation payments to Cadbury Schweppes, to make guaranteed concentrate purchases for the duration of the notice period and to undertake not to introduce a replacement competing brand into its bottling system for two years after a termination;

v) CCE to commit to achieve certain performance criteria, including growth and distribution, for key Cadbury Schweppes' brands. In support of this, CCE and Cadbury Schweppes to agree to maintain appropriate levels of marketing expenditure; and

vi) Cadbury Schweppes to provide additional marketing and transition support of 10.5 million pounds sterling for the first two years and 10 million pounds sterling for the next two years of the Licensing Agreements.

Financial Effects of the Proposed Disposal

In 1997, the first full financial year following the Disposal, it is expected that the effect of the Disposal on earnings per share will be modestly enhancing. The cash proceeds received from the sale of CCSB will initially be used to repay existing indebtedness and will ensure that Cadbury Schweppes will be well placed to take advantage of further opportunities to continue to develop its two business streams through capital investment and acquisition.

At the time of the announcement of its preliminary results in March 1996, Cadbury Schweppes announced that it was considering undertaking an equity offering to US investors in the second quarter of 1996. In the light of the expected receipt of cash proceeds from the Disposal, this offering is no longer appropriate.

Information on CCSB

CCSB was established in 1987 as a joint venture between Cadbury Schweppes and Coca-Cola. It bottles, cans and distributes Cadbury Schweppes and Coca-Cola products throughout Great Britain. It operates under various license agreements and other arrangements. It also distributes brands of other companies including the mineral water brands of the Nestle Group, Capri-Sun and Appletise under separate agreements.

For the year ended December 30, 1995, after a prolonged hot summer, CCSB reported sales of 904 million pounds sterling and profit before tax of 111 million pounds sterling. The net assets of CCSB at December 30, 1995 were 105 million pounds sterling.

Further announcements will be made as appropriate.

Cadbury Schweppes plc is a major global company in beverages and confectionery whose brands and products are consumed in over 190 countries around the world. Cadbury Schweppes ADRs are traded on the New York Stock Exchange. One ADR equals four ordinary shares.

CONTACT: Cadbury Schweppes plc

David Kappler, Group Finance Director

Mike Mason, Director of Investor Relations 

011-44-171-409-1313

or

Gavin Anderson & Company

Cameron King, 212-373-0200