DPSGs Coca-Cola windfall may not be as big as one hoped

DPSG's Coca-Cola windfall may not be as big as one hoped

Analyst group Stifel Nicolaus has said that Dr Pepper Snapple Group may get a lower windfall than first assumed from The Coca-Cola Co's deal to buy the North American operations of Coca-Cola Enterprises.

Dr Pepper Snapple (DPS) may only get US$500m from the Coca-Cola deal, compared to the $800m previously anticipated, said Stifel Nicolaus today (12 May).

DPS is set to get the payment as certain bottling contracts pass from Coca-Cola Enterprises to Coca-Cola Co. It has already received a $900m payment from PepsiCo, reflecting PepsiCo gaining the licences to certain DPS brands following its deal to acquire Pepsi Bottling Group and PepsiAmericas.

Stifel has reduced its estimate due to Coca-Cola's stronger weighting towards the fountain drinks channel, rather than packaged drinks.     

"Coke has an approximate 70% share of the US fountain market, consisting of chain and other accounts such as Burger King where soda is fountain-dispensed," said Stifel. "This may mean a lesser change-of-control cash payment."

However, despite a lower than expected payment from the Coca-Cola CCE deal, Stifel said that DPS may improve value in the longer term due to greater access to the Coke fountain system.

Many analysts toasted last week's first quarter results for DPS and have tipped the company for growth in 2010.