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Hershey to Acquire Cadbury Schweppes Operations

July 22, 1988 GMT

LONDON (AP) _ Cadbury Schweppes PLC said Friday it would sell its U.S. operations to Hershey Foods Corp. in a deal that will allow the Pennsylvania company to make and market the popular Peter Paul Mounds and Almond Joy candy bars and other confectionery products.

Under terms of their agreement, Hershey will acquire Cadbury’s three U.S. plants for $300 million, including the assumption of debt. The plants are located in Hazleton and York, Pa., and in Naugatuck, Conn.

Hershey also will make and distribute in the United States Cadbury candy including including Dairy Milk, York Peppermint Pattie, Carmello, Creme Eggs and other products under a long-term licensing agreement.

Cadbury said in a statement that it will retain ownership of all its brands and will continue to provide technology and develop existing and new brands in the United States.

Of Cadbury’s $1.52 billion in confectionery sales last year, $254 million were generated in the United States.

Based in Hershey, Pa., Hershey manufactures chocolate and pasta products and is the parent of Friendly Ice Cream Corp., which operats 840 restaurants in 15 states. The company also makes and markets Rollo and Kit Kat bars under an agreement with Cadbury competitor Rowntree PLC.

Richard A. Zimmerman, chairman and chief executive officer of Hershey, said in a statement that the acquisition ″is consistent with our strategic objective of acquiring companies and licensing product lines which complement and expand the corporation’s confectionery business.″

In 1987, Hershey reported net income of $148.2 million on sales of $2.43 billion.

Cadbury Chief Executive Officer Dominic Cadbury called the deal ″an excellent opportunity″ that will give the company ″a greater scope for the development of the Peter Paul and Cadbury brands in the United States and may lead to further cooperation in other parts of the world.″

He denied that the agreement with Hershey was a defensive move.

General Cinema Corp., a Chestnut Hill, Mass.-based concern with interests in movie theaters and soft drink bottling, has built up a 18.4 percent stake in the British confectioner.

″This was never seen by us in any way as a device for protection,″ he said. ″We have been looking at ways of restructuring the business and putting it on a firmer footing for some time.″

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Stephen Carr, an analyst with Warburg Securities, said he did not believe the agreement with Hershey would decrease the prospects of a General Cinema bid.

″General Cinema is still there and agruably is more interested in (Cadbury’s) drink business,″ he said.

Carr said the deal makes good business sense. ″It is good news in so far as it is a good price, and will increase earnings per share.″

Cadbury said it expects to earn $19 million in the first year of the licensing agreement based on sales volume.