Cadbury Schweppes is eyeing a sale of its US beverages arm to private equity firms following strong interest from groups including Kohlberg Kravis Roberts, Bain Capital and Texas Pacific Group.

Cadbury has been flooded with takeover approaches for the business since it said last week that it planned to seek a demerger after Nelson Peltz, the activist investor, had snapped up 3 per cent of the company and put pressure on management to break itself up to create more value.

Strong interest from some of the world’s largest private equity groups means that it is more likely Cadbury will end up selling the beverages business, which owns 7Up and Snapple, rather than press ahead with its plan to float it. Sources close to Cadbury have said that its bankers, UBS, Morgan Stanley and Goldman Sachs, are drawing up a flotation prospectus for the drinks business due to be sent to investors in June.

So far, the approaches have been only tentative, they said, but if a buyout firm or a con-sortium puts a compelling offer on the table, Cadbury would be minded to sell the unit ahead of any flotation, the sources said.

Sources had previously said that the private equity firms Blackstone and Lion Capital would consider bidding for the American business if it came up for sale. The pair are keen on the sector and jointly acquired Cadbury’s bottling business in 2005 for £1.3 billion.

Analysts also believe that a sale is more likely because of the complexity of a demerger.

In a note to clients this week, Citigroup said that there were no obvious trade buyers for the business, given competition issues around Pepsi and Coca-Cola. It said that one possible “long shot” bidder could be Kraft, whose only exposure to beverages is Capri-Sun and Tang — but it added: “We think the most likely outcome is that Cadbury’s US beverage business will be sold to a private equity group.”

It said that the present wall of money in private equity hands would probably spark a bidding war for the asset which could top its valuation of £7.3 billion for the unit.

A potential sale of the drinks business would also leave the rest of Cadbury, the confectionery business, vulnerable to a takeover. Kraft and Hershey have been named as the most likely bidders.

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