updated 10/10/2007 8:23:22 AM ET 2007-10-10T12:23:22

Cadbury Schweppes plans to spin off its U.S. beverage division that includes the Dr Pepper, 7Up and Snapple brands to its shareholders rather than sell it.

The announcement Wednesday came as the candy maker announced a 10 percent rise in sales in its confectionary division, which makes Dairy Milk chocolate and Trident chewing gum.

Cadbury said it would list the business as a separate company on the New York Stock Exchange through a share issue to existing shareholders. It expects to complete the spinoff before the second quarter of 2008. Terms were not disclosed.

The future of the U.S. drinks business has been up in the air since earlier this year, when Cadbury Schweppes PLC came under pressure from investors led by U.S. billionaire Nelson Peltz to separate its beverage and candy arms.

The company subsequently announced a "twin-track" process in March to determine whether to sell or separate the unit, which generates more than 80 percent of its revenues and profits in the United States.

It had been leaning toward a sale but indicated in August that a spinoff was the more likely option because of turbulent debt markets.

"With an acceptable sale unlikely in the foreseeable future, the board believes it is prudent now to focus on de-merging our Americas beverages business," Chairman John Sunderland said Wednesday.

The company said that Todd Stitzer will remain as CEO of Cadbury PLC with Ken Hanna as chief financial officer.

The beverage business will be led by Larry Young, currently CEO of the bottling operation and formerly president and chief operating officer of Pepsi-Cola General Bottlers. John Stewart will continue as chief financial officer.

The restructuring will lead to 470 job losses, the company said.

The announcement coincided with a Wall Street Journal report on Wednesday, citing unidentified sources, that representatives of Hershey Trust, the charitable group that controls The Hershey Co., met with Cadbury in early September to discuss a merger, and asked whether a deal could maintain the trust's controlling stake in Hershey.

Analysts have speculated that Hershey Co., the largest U.S. candymaker, wants to buy some or all of Cadbury's chocolate and gum lines. In April, Stitzer said that a combination of some of the two companies' businesses would make sense.

On another potential deal, Stitzer said Tuesday that Cadbury had no interest in buying Godiva, the premium chocolate business of Campbell Soup Co. and would instead concentrate on expanding its own Green & Black's premium brand.

"We've got no plans to acquire smaller premium brands at this point," he said.

Campbell has been divesting non-core units and last month confirmed it is exploring the possible sale of its Godiva chocolate brand.

In its trading update for the third quarter, Cadbury said that revenue at its confectionary business rose 10 percent, bringing its year-to-date revenue growth to 7 percent.

That exceeds the company's full-year target range between 4 percent and 6 percent.

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