Cadbury Schweppes has confirmed that it is planning to split itself into two, separating its confectionery and soft drinks business.
The firm's Americas Beverages unit is to split off, leaving the confectionery arm with brands such as Dairy Milk chocolate and Trident chewing gum.
Reports on Thursday suggested that private equity groups had expressed an interest in buying the drinks arm.
The Americas Beverages unit includes brands such as Dr Pepper and Seven-Up.
Cadbury Schweppes said it would provide more information on the demerger with its trading update on 19 June.
"We believe now is the moment to separate and give both management teams the focused opportunity to extract the full potential inherent in these excellent businesses," Cadbury's chairman Sir John Sunderland said.
Cadbury Schweppes shares closed up 2.9%, or 18 pence, at 620p.
Shares in Cadbury Schweppes rose 10% earlier in the week after the US businessman Nelson Peltz bought a stake in the firm, sparking takeover speculation.
The decision to demerge its US drinks business may be seen as a victory for Nelson Peltz
Mr Peltz has made no secret of his desire to see the drink business demerged from the chocolate-to-chewing gum division.
But Cadbury's chief executive Todd Stitzer said that the demerger was being discussed long before Mr Peltz bought his stake.
"This split has been under consideration for some time and is the culmination of our strategy to maximise shareholder value," he said.
Analysts believe that the beverage business may be worth up to £7bn as a separate entity, while the chocolate and chewing gum operations could be worth as much as £9bn.
This compares favourably with Cadbury Schweppes's current market value of about £12.6bn.
Easter Egg recall
In recent months, the company's confectionary division has suffered a string of setbacks.
Thousands of chocolate bars were taken off the shelves in the UK after the Food Standards Agency learned that traces of salmonella had been found in some chocolate bars.
Batches of Easter Eggs have been recalled because they were not labelled as being unsuitable for those with nut allergies.
Cadbury's is the third largest carbonated soft drinks group in the world by sales volume, behind Coca-Cola and Pepsi.
The firm bought its US drinks business in 1995 for £1.8bn and in 2006 the division made profits of £584m.
The European beverage business, which included brands such as Orangina and Oasis, was sold to a private equity buyer for £1.2bn in early 2006 while the majority of its UK drinks operations were sold to Coca-Cola in 1999.
The Cadbury Group merged with Schweppes in 1969.