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Glass half empty as Cadbury loses pounds 1bn while sale falls flat.

Byline: By John Revill Business Staff

Confectionery giant Cadbury Schweppes has been one of the biggest casualties of the stock market downturn, with more than pounds 1 billion wiped from its market value.

The Bournville firm has seen its shares fall by 10 per cent in the last week, from 587.5p at the end of trading on Thursday to 534p.

As a result its market capitalisation slipped from pounds 12.35 billion to pounds 11.25 billion.

Other Midland companies also saw their market value fall in the wake of concerns over sub-prime lending in the US and general credit downturn in the rest of the world.

Pub operator Mitchells & Butlers saw its value fall from pounds 2.837 billion to pounds 2.644 billion as its share price fell from 705.5p to 657p in the last week.

Severn Trent, meanwhile, saw its share price fall six per cent from 1323p to 1244p, wiping pounds 185 million off its market capitalisation which fell from pounds 3.101 billion to pounds 2.916 billion.

But despite the downturn, analysts were refusing to panic, saying the falls in prices reflected only the general market downturn.

Cadbury had the misfortune to encounter the market dip as it seeks to off-load its American soft drinks business and in the wake of interim results which were seen as disappointing in the City.

Martin Deboo, an analyst at banking group Investec, said: "Cadbury is trying to separate its American soft drinks business, but the market is taking increasing fright because it is almost impossible to sell the business to private equity companies in America because of the credit crunch over there.

"There have been stories that Cadbury had decided to float off the business instead. There would be different value for shareholders in a float than a sale to private equity, although that story is only speculation at the moment.

"The valuations for a sale of the drinks business before were north of pounds 8 billion, but that is more likely to be around pounds 7.2 billion. Others have had it around pounds 6.5 billion and a float could raise something similar to that."

The ongoing sale would be likely to distract management attention, although Mr Deboo said Cadbury was a defensive stock which could mitigate against further falls.

Mitchells & Butlers was in line with the general stock market downturn over the past week, although some investors may also have been disappointed by the postponement by the proposed joint venture with property tycoon Robert Tchenguiz which could have released around pounds 4 billion.

Severn Trent, meanwhile, although down, has outperformed the FTSE as a whole over the last week.

One City source said: "Water companies are seen as defensive, because although they are regulated, they are a monopoly and people will always need water, no matter what the economy does."
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Aug 17, 2007
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