Merrill Lynch has initiated coverage of Central Eastern Distributing Corp. The financial management company said today (29 July) that it has begun its coverage of the drinks firm with an 'overweight' -70% recommendation.

"We expect the acquisitions of Bols and Bialystock to be approved, in-line with company guidance," Merrill Lynch said in a research report. "The proposed acquisition of Bols and Bialystock makes strategic sense, in our opinion. We believe CEDC can use its extensive distribution platform to extract synergies and deliver cash flow in order to both deleverage and grow its business.

"CEDC will continue to be acquisitive, in our opinion. We think, however, that there will be some breathing space whilst management integrates the Bols and Bialystock businesses.

"CEDC will need to balance the interests of its distribution customers with its desire to promote the Bols and Bialystock brands that it is acquiring in our view," the report added. "As we see it, contracts will be lost but that this will be more of a medium term phenomenon. Distribution customers will wait to see the effects of the Bols and Bialystock acquisitions on their brands, before switching contracts away from the only supplier with a national distribution platform, in our opinion."