The private equity groups Lion Capital and Blackstone are weighing up possible bids for Cadbury Schweppes’s drinks business, The Times has learnt.

Both firms are understood to have expressed their interest in the division, which includes brands such as Dr Pepper, Seven-Up and Canada Dry ginger ale. It is possible that they could ultimately make a joint bid as they did when they joined forces in 2005 to acquire Orangina, Cadbury’s European beverages arm, for £1.3 billion.

Cadbury’s is in the process of splitting its drinks business from its confectionery division and is thought to be considering a demerger, in which investors would be offered one share in each part, as an alternative to a sale. The company is expected to make an announcement within days.

Analysts say Cadbury’s drinks business, is worth between £6.5 billion and £8 billion and a separated confectionery business could be worth £9 billion. The combined value of the separate entities could be worth at least £4 billion more than Cadbury’s current market value of £12.6 billion.

It is understood that Lion Capital, which is based in London, and America’s Blackstone are at the preliminary stage of considering offers for the drinks business if it is put up for sale. Analysts said that other private equity firms, such as Kohlberg Kravis Roberts (KKR), could also be attracted by Cadbury’s highly cash-generative drinks arm.

Roger Carr, a senior nonexecutive director of Cadbury Schweppes, is also an adviser for KKR. A potential conflict of interest means that he could be barred from discussions over a sale to private equity.

News of the private equity interest comes after The Times yesterday reported that Cadbury Schweppes had asked its bankers, Goldman Sachs, UBS and Morgan Stanley, to prepare for a break-up of the company, after pressure from Nelson Peltz, the American billionaire activist investor. In recent days he has built a 2.98 per cent stake and is pressing the board to split confectionery and drinks.

Rob Mann, an analyst at Collins Stewart, the broker, said it had become “untenable” for Todd Stitzer, Cadbury’s chief executive, to fail to act. “Cadbury’s is certainly not a dead duck but it has been an underperforming business and part of this is due to its structure. An independent confectionery or beverages business will probably lead to improved profits and performance.”

Spinning off the drinks business would leave Cadbury free to concentrate on its confectionery division, the world’s largest, which includes brands such as Dairy Milk and Flake.

Julian Hardwick, an analyst at ABN Amro, said that Cadbury’s beverages business could fetch about 11 to 12 times earnings before interest, tax, depreciation and amortisation in a sale, compared with 15 to 16 times for the core confectionery business, which has better growth opportunities. Investec estimates that a sale of the beverages unit could raise up to £8 billion.

Although the idea of a break-up has long been rejected by Mr Stitzer, he is understood to have come round to the idea.

Cadbury’s beverages business generated estimated profits of £503 million last year.

Cadbury Schweppes declined to comment last night.

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