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As Cadbury Schweppes (CBRY.L: Quote, Profile, Research) moves closer to being a pure confectionery company by selling its North American Dr Pepper drinks unit, industry analysts say it should now pull off a merger deal before it becomes a target.

Cadbury’s shareholders on Friday approved the British group’s plan to spin off Dr Pepper in May, and analysts say the company is now looking to buy U.S.-based chocolate maker Hershey Co (HSY.N: Quote, Profile, Research).

The deal would have clear strategic logic, as Cadbury, the world’s biggest confectionery group, lacks presence in the U.S. chocolate market, while Hershey is looking to expand overseas.

The London-based maker of Dairy Milk chocolate, Trident gum and Halls cough drops will be reborn on May 2 as Cadbury Plc after being wedded to Schweppes for 39 years. The Dr Pepper Snapple Group (DPSG) unit will be separately listed in New York from May 7 payday advance online.

“Cadbury’s management has made clear that they are interested in a deal with Hershey in order to consolidate the confectionery industry,” said analyst Ian Kellett at Numis.

Others are conscious of the obstacles, particularly the potential obstruction of the trust that controls Hershey.

“It would make strategic sense to combine Hershey and Cadbury in the U.S., although it is unlikely near-term, given the trust’s commitment to retain control of Hershey,” said Polly Barclay at Cazenove.

However, last week’s announcement that the Hershey Trust’s Chief Executive Robert Vowler, Hershey’s top shareholder, will retire in April 2009, could mean events are moving forward after fruitless Cadbury-Hershey takeover talks of recent months. 

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