Cadbury Schweppes, the world's largest confectionary group, has agreed to sell its European drinks arm to a private equity consortium led by the Blackstone Group for £1.27 billion in cash.

At the end of a much-flagged auction process run by Goldman Sachs, the Blackstone consortium successfully fought off competition from rival groups Permira and France's PAI to secure Cadbury's Europe Beverages business, which makes Orangina, Oasis and Schweppes drinks.

Blackstone's partner in the deal was Lion Capital, the London based food and drinks buyout specialist that is the former European arm of Hicks, Muse Tate & Furst of the United States.

The sale of the European division leaves Cadbury's free to concentrate on its American soft drinks business, including Dr Pepper, and its worldwide confectionary operations, renowned for chocolates such as Dairy Milk.

The group will use the proceeds from the sale to trim its £4.3 billion debt pile.

Todd Stitzer, the chief executive of Cadbury Schweppes, said: "I'm delighted that within such a short time we have achieved a firm offer for Europe Beverages at a price which reflects the quality of its brands and the strength of its management team. Following completion of a deal, we will be able to focus on our faster growing confectionary and other beverage business."

Cadbury's put its European drinks business on the block in September - in its second attempt at a sale of unwanted assets. It first tried to sell its soft drinks interests outside America to Coca-Cola in 1999 in a deal that fell foul of the regulators and left it sitting on the business in Europe.

Today's deal, which is subject to a £63.5 million break fee payable by Cadbury's if it walks away, will now be referred to competition regulators. Cadbury's, which will also begin talking to its unions, said assuming there are no hitches the sale should go thorough early next year.

If Cadbury's lets the deal slip, it will also have to hold on to Europe Beverages for a year.

With the deal telegraphed well in advance, Cadbury's shares were little moved today - losing 2p to 565.5p, valuing the group at more than £11.8 billion.

Although Cadbury's American business has begun to win market share, Europe Beverages delivered the group a disappointing performance last year - posting a 2.5 per cent drop in operating profits of £117 million on depressed sales of £653 million.

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