European Coke bottlers to merge
THREE European bottlers of Coca-Cola drinks have agreed to merge in what will be one of the continent’s largest consumer products deals yet, as they aim for greater scale.
THREE European bottlers of Coca-Cola drinks have agreed to merge in what will be one of the continent’s largest consumer products deals yet, as they hope greater scale and cost cutting will help revitalise sluggish soft drink sales.
Coca-Cola (Coke) Enterprises said yesterday it would join Coca-Cola Iberian Partners and the German bottling business of Coca-Cola. The new firm will be the world’s largest independent bottler of Coke drinks by net revenue, with business in 13 countries.
The transaction will give the new company — Coca-Cola European Partners — a value of ¤28bn including debt, a source involved in the deal said, adding that this was based on the core earnings of all three companies, the planned synergies and Coke Enterprises’s current valuation.
Coca-Cola European Partners will have annual revenue of $12.6bn and earnings before interest, tax, depreciation and amortisation of $2.1bn and will bottle and distribute Coke drinks in countries including Spain, France and Britain.
“It’s a major milestone and a major transaction that will benefit all parties involved,” said Coke CEO Muhtar Kent. “There’s no question we all believe that increased investment potential will lead to a better trajectory in terms of increased revenue growth.…”
Coke Enterprises, whose drinks include Coke, Fanta and Capri-Sun, is struggling with sales in western Europe, where austerity-hit consumers are drinking less soda, forcing producers to discount them, which hurts revenue and profit.
Combining the bottlers, which buy drink concentrate from Coca-Cola and package and distribute the drinks, will remove duplicate functions and free up cash to be reinvested in marketing and sales.
The formation of Coke European Partners is the latest example of bottlers consolidating to face industry challenges. Coke and SABMiller agreed in November to combine their soft drink businesses in Africa, while four Coke bottlers in Japan merged in 2013.
The German and Spanish bottlers themselves are the product of several bottlers merging. “This is not something that just came out of a hat,” said Mr Kent. “It’s an evolution of what you’ve seen in other parts of the world.”
Coke Enterprises shareholders will receive one share in the new company and a onetime cash payment of $14.50 a share. The cash portion, about $3.5bn, will be funded via new debt issued by Coke European Partners.
The deal is structured as a so-called tax inversion, with Coke Enterprises moving corporate headquarters to London and cutting exposure to higher US taxes. Coke Enterprises, now based in Atlanta, used to be the biggest Coke bottler in North America, but sold its US operations to Coke in 2010, leaving it operating solely in Europe.
Coke Enterprises itself was spun off from Coca-Cola in 1986 as a way to boost Coke’s profit margins and balance sheet by separating the capitalintensive, low-margin bottling business into a different firm.
Coke Enterprises shareholders will own 48% of the new company, with Coke Iberian Partners’s shareholders owning 34%. Coca-Cola, the world’s largest soft-drink maker, will own 18%. It will be incorporated in London and trade on Euronext Amsterdam, New York and Madrid stock exchanges.
It’s an evolution of what you’ve seen in other parts of the world