The turmoil in credit markets claimed another victim yesterday as Cadbury Schweppes formally scrapped the sale of its £6.5 billion American drinks arm and said it would instead spin off the unit.

Confirming a report in The Times, the British confectionery and soft-drinks maker said the turbulence in the debt market had made it impossible to sell the unit, home to Dr Pepper, 7Up and Snapple, for an acceptable price.

Instead, Cadbury will opt for a flotation of the business, probably in the second quarter next year, on the New York Stock Exchange.

The announcement came as Cadbury said that its chairman, Sir John Sunderland, is to step down from the board following the demerger, after 40 years’ service with the company.

In recent weeks, there has been speculation of a growing rift between Sir John and Todd Stitzer, Cadbury’s chief executive, over the group’s future direction after it emerged earlier this year that Nelson Peltz, the activist American shareholder, had built up a stake in the company and was agitating for change.

However, a spokeswoman yesterday denied any bad blood between the two and said that Sir John’s departure had been on the cards.

She said: “It has always been his plan. He has been chairman for five years, he was chief executive before and now it is time to move on.” She added that the board’s decision to demerge the drinks unit had been unanimous.

Cadbury first announced plans to sell or demerge its US drinks business in March, just days after Mr Peltz disclosed that he had built a 3 per cent stake in the company and was pressing management for a break-up.

Cadbury denied that Mr Peltz had influenced it and has always insisted that it had planned a demerger or sale.

Private equity groups had been seen as the most likely contenders for a sale, but as they prepared to submit first-round bids, the credit crunch took hold and forced Cadbury to shelve the process.

Although the company as recently as August insisted that a sale was still on the cards, sources had said that management had quietly told its bankers to prepare the unit for a demerger.

Speaking yesterday, Mr Stitzer said that debt markets had not recovered and that an acceptable sale price was unlikely in the foreseeable future.

He said that the group was “very focused on a demerger” and that existing shareholders would receive shares in a New York-listed beverages company.

Cadbury said that Gil Cassagne, a 25-year Cadbury veteran who has been running the US unit, will step down “for personal reasons to pursue other interests”.

Larry Young, the head of Cadbury’s bottling arm, takes over as the unit’s chief executive.

Cadbury said that it would spend £35 million cutting a further 470 jobs in the division.

It expects, as a result, to save an annual £35 million in costs.

It is not yet clear whether Cadbury will raise fresh funds in the spin-off. A spokesman said that if credit market conditions improved, the group would move to gear up the unit — which is highly cash-generative — and look at a return of cash to shareholders.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax