Oct. 10 (Bloomberg) -- Cadbury Schweppes Plc plans to spin off its U.S. drinks unit, the maker of Dr Pepper and 7-Up, after the seven-month search for a buyer was derailed by collapsing credit markets.

Cadbury, the world's largest candy maker, will list the Americas Beverages division on the New York Stock Exchange, Chief Executive Officer Todd Stitzer said on a conference call. The London-based company will replace the head of the business as its sodas lose market share. The unit accounted for about 35 percent of Cadbury's 7.4 billion pounds ($15.1 billion) of sales in 2006.

The decision leaves Cadbury to focus on increasing sales and margins at Dairy Milk chocolate and Trident gum. Stitzer said today that confectionery sales rose 10 percent in Europe after a ``particularly good quarter'' in the U.K., and declined to rule out a sale of the drinks unit completely.

``There's some resolution,'' said Martin Deboo, an analyst at Investec Securities in London. ``They wouldn't refuse any sensible offer, but the uncertainty around credit markets has to clear before bidders will come forward.''

Deboo estimated the drinks unit is worth 6.9 billion pounds. Analysts had said before the subprime crisis that the sale may have fetched $15 billion. Record subprime mortgage defaults in the U.S. made investors reluctant to buy assets with credit risk.

The drinks division, which controls 15 percent of the U.S. soda market, was put up for sale in March after pressure from Nelson Peltz, whose companies own a 3.47 percent stake in Cadbury.

Job Cuts

Cadbury, the maker of Trident gum and Dairy Milk chocolate, also said today it would cut 470 jobs at Americas Beverages at a cost of 35 million pounds, and expects to save 35 million pounds a year from the reductions starting in 2008.

Cadbury shares rose 15.5 pence, or 2.6 percent, to 616 pence in London, valuing the company at almost 13 billion pounds.

The spinoff is ``ultimately disappointing,'' according to a note from Bear Stearns Cos., because investors expected Cadbury to make as much as 7 billion pounds from the sale. The confectioner will ``struggle to defend its current premium,'' the note said.

Before today, the stock had slumped 20 percent from a high of 723.75 pence in May, when the sale was expected to proceed and speculation mounted that Cadbury may get a bid for its remaining confectionery business. The shares were unchanged in 2006, compared with a 10 percent gain at larger rival Nestle SA. Nestle got 12 percent of its 98.5 billion Swiss francs ($83.5 billion) of sales last year from confectionery and biscuits.

1969 Merger

Stitzer declined to rule out a sale completely, saying that he'll pursue ``whatever creates most value for shareholders.'' The 55-year-old CEO also declined to comment on a report in the Wall Street Journal that said Cadbury had met with members of Hershey Co.'s controlling trust to discuss a partnership.

In July, Cadbury became the first company to delay a transaction because of turmoil related to the U.S. subprime mortgage crisis. The spinoff won't be finished before the second quarter of 2008, the company said today.

Cadbury rejected an offer of about $13 billion for the unit from a group made up of buyout firms Blackstone Group LP, Kohlberg Kravis Roberts & Co. and Lion Capital LLP last month, the Financial Times reported.

Cadbury Schweppes, formed by the 1969 merger of confectioner Cadbury Group Ltd. and beverage maker Schweppes Ltd., bought Dr Pepper/Seven-Up Cos. for $2 billion in 1995 and fruit-drinks maker Snapple Beverage Corp. from Peltz's Triarc Cos. for $1.45 billion in 2000. After selling the U.S. unit, Cadbury will only sell Schweppes-branded drinks in Australia.

Sports Drink

Cadbury today named Larry Young to head the Americas Beverage unit, replacing Gil Cassagne, who left for ``personal reasons.'' Young previously worked for PepsiCo Inc. for 25 years, and joined Cadbury in 2006. The company also said Chairman John Sunderland, who is retiring next year, will stay until the spinoff is completed.

Sales of the Accelerade sports drink, which went on sale in the quarter, were ``significantly'' below forecast, Cadbury said.

Separately, Steve Strachota, the head of Cadbury's eastern European business, said in an interview in Moscow that the company will seek more gum and chocolate acquisitions in Russia. He said the company currently isn't in talks with any Russian candy makers.

The company's third-quarter confectionery revenue rose 10 percent, excluding currency swings and acquisitions, beating its full-year goal for a range between 4 and 6 percent.

Milk Costs

U.K. chocolate sales recovered from the previous year, when hot weather and salmonella found in some bars hurt revenue, and Cadbury gained 1 percent of market share. The company showed new commercials for the 102-year-old brand starring a gorilla playing the drums along to Phil Collins' song ``In the Air Tonight.''

In the U.S., sales increased 14 percent, boosted by sales of Stride gum. Cadbury expanded its market share by 3 percent from the previous year.

Higher milk prices mean Cadbury's commodity costs will be about 6 percent higher next year. The CEO said the company has been able to charge customers more to recover ``most'' of the increases. Interest payments will also be higher in the second half of 2007 because of higher borrowing costs.

Stitzer and Chief Financial Officer Ken Hanna declined to speculate on Americas Beverage's possible market value. A cash return to shareholders, as well as distribution of shares in the drinks business, is a ``possibility,'' Hanna said. Executives decided to pursue the spinoff early last month, Stitzer said.

To contact the reporter on this story: Amy Wilson in London at awilson23@bloomberg.net;

Last Updated: October 10, 2007 11:47 EDT