SAN FRANCISCO (Dow Jones) -- Trian Fund Management L.P., the investment vehicle of activist investor Nelson Peltz, is urging further action at Cadbury Schweppes (NYSE:CSG) , the British candy and drinks giant.
Trian suggested Cadbury (NYSE:CSG) should set near-term operating margin targets, sell off some beverage assets, add new board members, and recapitalize the balance sheet through a special dividend or share repurchase.
In a letter to the board Tuesday, the investment fund warned it will "become significantly more active" in evaluating its alternatives if Cadbury (NYSE:CSG) fails to make "meaningful" progress in 2008.
"If these targets are not achieved, we also believe there is a reasonable probability that matters will be taken entirely out of the hands of the board and management," the fund said.
U.K.-based Cadbury (NYSE:CSG) (CSG) is in the process of separating its candy and drinks businesses. Besides its namesake chocolates, some of the company's other brands include Dr Pepper, 7 UP, Trident gum, and Sour Patch Kids.
Trian supports the beverage spin off. But it is urging Cadbury (NYSE:CSG) to take it a step further.
The investment vehicle said the company should consider selling drink brands, such as Motts, Clamato, ReaLemon and Rose's. Cadbury (NYSE:CSG) plans to spin off its beverage business by the second quarter of 2008. It will be renamed Dr Pepper Snapple Group Inc.
Trian confirmed Tuesday it owns a 4.5% stake in Cadbury (NYSE:CSG) . It began acquiring the position in December 2006 and recently boosted its stake through a partnership with Qatar Holdings LLC, a sovereign wealth fund.
Trian said Cadbury (NYSE:CSG) is trading at a discount to rivals Wm. Wrigley Jr. Co. (NYSE:WWY) ( WWY), Tootsie Roll Industries Inc. (NYSE:TR) (TR), and Lindt & Spruengli AG.
The fund said Cadbury (NYSE:CSG) share price could be valued as much as 60% above its current price on the London Stock Exchange, or 970 pence, if its initiatives are followed. Cadbury (NYSE:CSG) shares are currently trading around 625 pence.
In New York Stock Exchange trading, shares rose 2.7% to 50.56. The stock is up 17% this year.
Trian also owns stakes in H.J. Heinz (HNZ) and Kraft Foods Inc. (NYSE:KFT) (KFT) and has pressured those management teams to make changes as well.
(END) Dow Jones Newswires 12-18-07 1732 Copyright (c) 2007 Dow Jones & Company, Inc.
