Philip Morris to Sell Seven-Up’s U.S. Operations to Dallas Group

Philip Morris Inc. has agreed to sell the U.S. operations of Seven-Up, the nation’s third most popular soft drink, for $240 million to a Dallas investment group that owns Dr Pepper and part of A & W Root Beer.

The sale gives the investment firm Hicks & Haas, which acquired Dr Pepper Co. in August for $416 million and holds an undisclosed stake in A & W Brands Inc., a 13% share of the nation’s soft-drink market, according to the trade publication Beverage Digest.

The Hicks & Haas group outbid more than a half dozen suitors, including former Seven-Up President Bill Winter and Cadbury Schweppes, according to Jesse Meyers, publisher of the Greenwich, Conn.-based Beverage Digest. Despite the acquisition, Hicks & Haas still lags behind Coca-Cola Co. and Pepsico Inc., which held market shares of 39.6% and 29.4%, respectively, in June, Beverage Digest said.

Hicks & Haas partner Thomas O. Hicks said in a statement issued in Dallas that he and Robert B. Haas would be named co-chairmen of Seven-Up Holding Co., the purchasing group. John R. Albers, the president and chief executive of Dr Pepper, will become president of Seven-Up, too.

The deal is expected to be closed within the next few weeks.

Philip Morris’ agreement to dispose of the domestic holdings of Seven-Up follows a failed attempt by the company to sell both Seven-Up’s U.S. and overseas operations to No. 2 Pepsico this spring for $380 million. That sale was scuttled by the Federal Trade Commission, which objected to the acquisition on antitrust grounds. As a result, Pepsico settled for Seven-Up’s overseas operations, paying $246 million cash in July.

In selling Seven-Up’s overseas and domestic operations, Philip Morris, a New York-based food products and cigarette conglomerate, has finally scored a success for a soft drink that has lost more than $25 million for Philip Morris since it was acquired in 1978.

“Philip Morris is finally a winner after years and years of aggravation with Seven-Up,” said Emanuel Goldman, a beverage analyst for Montgomery Securities in San Francisco.

Haas called Seven-Up “one of the truly premier brands in the soft-drink industry. We are looking forward to enhancing the energy and vitality of Seven-Up in order to meet the competitive challenges.”