Dr Pepper Snapple: Spin-off Bargain?

Dr Pepper Snapple

On Wednesday the 7th, Dr Pepper Snapple Group (::yahoo(“DPS”)::) officially began to trade. Its $25 price tag is lower than many expected after the soft-drink maker was spun-off of its parent company, Cadbury Schweppes.

Because spin-offs in general beat the market (and can make for excellent hunting grounds), I’m always looking for potential purchases. DPS stands out because of its well recognized brand names, competitive advantage, and unique spin-off situation.

Cadbury, its prior owner, trades on the London Stock Exchange. But when DPS was spun-off, it traded on the NYSE. This is a problem for mutual funds and institutions in the UK that owned Cadbury. They can’t or don’t want to hold a foreign-traded security. So more than likely (this may have already started), these institutions will sell their newly received DPS shares without regard to price.

Some of the brands of DPS include: Dr Pepper, Snapple, 7 UP, Motts, Sunkist, A&W, Hawaiian Punch. This post isn’t meant to be a complete analysis of the investment, just my initial thoughts on a potential opportunity.


The table below compares DPS with other soft-drink and consumer goods companies. Continue reading “Dr Pepper Snapple: Spin-off Bargain?”