Cadbury Schweppes' proposed £8 billion sale of its US drinks business could be under threat as bidders struggle to raise debt in tightening credit markets, it was claimed yesterday.
And a possible Kraft bid for the confectionery side is also diminishing.
The sale of the US business, which includes Dr Pepper, Snapple and 7-UP may be delayed or even cancelled after banks were forced to lower the amount of debt used to back the deal, it was suggested.
Investment bank Morgan Stanley, which is handling the sale, declined to comment. It is said to be lowering its lending terms to ensure the debt can be syndicated to institutional investors.
The Cadbury Schweppes sale is the latest major deal to be affected by tougher credit markets amid investor fears over the sub-prime mortgage crisis in the US.
The £11.1 billion buyout of Alliance Boots has also become more expensive for private equity firm Kohlberg Kravis Roberts after the company was reportedly forced to offer more favourable terms to lenders.
The price tag for Cadbury Schweppes' US business is now believed to have dropped by about £1 billion as a result of the tougher debt terms.
Two private equity teams - Bain Capital, Thomas H Lee and Texas Pacific, and a rival Blackstone, KKR and Lion Capital grouping - are rumoured to be in the running for the operation and preparing to return first-round bids next week.
Cadbury is expected to update on the sale of its US business at interim results next week.
Insiders say the company's expectations on the price had always been at the lower end of market forecasts. They also played down suggestions that the sale process could be sacrificed in favour of an IPO or demerger.
Panmure analyst Graham Jones said that while a demerger will be the fall back position for Cadbury, he believes it will be keen to complete a disposal.
He suggested that Cadbury's chief executive Todd Stitzer may be regretting ruling out a demerger last autumn only to change his mind in the new year.
"A private equity credit crunch is now clearly putting at risk both the timing of the Americas Beverage disposal and the consider-ation," he said.
Analysts also believe that the probability of an offer for Cadbury's confectionery business from Kraft Foods has reduced, following Kraft's 5.3 billion euro (£3.55 billion) acquisition of the biscuit arm of Danone.
Sanford Bernstein analyst Andrew Wood continues to believe an offer for the confectionery division will be forthcoming.
However, he has revised downwards his assessment of the probability of a bid for the business, from 60-70 per cent to 50-60 per cent.
Mr Jones had rated the probability of a Kraft bid at 30 per cent. "While we still think that Kraft must be sorely tempted to buy such an attractive business, the fact that it is buying Danone's biscuit side this year, pushes out our view of the timescale for a bid into the latter half of 2008," he said.