US: Coca-Cola Co confirms CCE acquisition

The Coca-Cola Co. has confirmed that it is to acquire the North American operations of its largest bottler, Coca-Cola Enterprises (CCE).

In an announcement this morning (25 February), Coca-Cola Co said the deal will “strategically advance and strengthen” its partnership with CCE and “drive long-term growth” for all shareholders.

In what the firms' said is a “substantially cashless transaction”, Coca-Cola Co. will acquire CCE's entire North American business, which consists of around 75% of US bottler-delivered volume and almost 100% of Canadian bottler-delivered volume.

At the close of the transaction, The Coca-Cola Co will have direct control over approximately 90% of the total North America volume, including its current direct businesses. The acquisition includes consideration of Coca-Cola Co’s current 34% equity ownership in CCE, valued at $3.4bn.

In addition, consideration includes the assumption of $8.88bn of CCE debt and all of the North American assets and liabilities - including CCE's accumulated benefit obligation for North America of $580m as of 31 December 2009, and certain other one-time costs and benefits.

The deal marks a u-turn in Coca-Cola Co's strategic thinking and follows PepsiCo's deal to acquire full control of its own major bottlers, PepsiAmericas and Pepsi Bottling Group.

"We are not acquiring CCE, rather we are acquiring their North American operations, and they remain one of our key bottling partners with world-class management, financial and operational capabilities,” said Coca-Cola Co CEO Muhtar Kent.

“We have a strong and unrelenting belief in our unique and thriving global bottling system. Our new North American structure will create an unparalleled combination of businesses, which will serve as our passport to winning in the world's largest non-alcoholic ready-to-drink profit pool.

“This transaction offers compelling value to both The Coca-Cola Company and CCE shareowners and will create substantial and sustainable benefits for both companies' stakeholders,” he added.

In a concurrent agreement, CCE will buy Coca-Cola Co’s bottling operations in Norway and Sweden for $822m. It will also have the right to acquire Coca-Cola’s 83% equity stake in its German bottling operations 18 to 36 months after closing for fair value.

A new entity, which will retain the name Coca-Cola Enterprises, will be created through a split-off that will hold CCE's European businesses. CCE's public shareowners will exchange each existing CCE share for a share in the new entity and will hold 100% of this new entity.

CCE will provide its shareowners, excluding The Coca-Cola Company, with a special one-time cash payment of $10 per share.

Following completion of the transaction, it is expected that CCE will adopt a programme to repurchase up to around $1bn of shares and a policy of paying an expected annual dividend of $0.50 per share.

CCE's chairman and CEO, John Brock, said: "This transformation creates significant near-term shareowner value through the sale of the North American business for fair value, delivering over $4bn in cash to CCE shareowners, through cash distributions and planned share repurchases.

"At the same time, this enables our shareowners to retain equity in a sales and distribution company with an improved growth profile. In the future, CCE shareowners will also benefit from the expansion of our European business and our improved financial flexibility."

At the close, The Coca-Cola Co. will rename the sales and operational elements of the North American businesses Coca-Cola Refreshments USA, Inc. and Coca-Cola Refreshments Canada, Ltd, which will be wholly-owned subsidiaries of The Coca-Cola Co.

Both firms expect the transactions to close in the fourth quarter of 2010.

For an update on the deal, following Coca-Cola Co's conference call, click here.

View the deal at-a-glance by clicking here.

To view just-drinks' comment on the move, click here.

To view the original press release, click here.