Coke chiefs enter face-off over Philippino operations

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Shareholders in Sydney are keeping a close eye on Coca-Cola Amatil boss David Kennedy after a string of rumours reporting an imminent sale of the company's Asian operations.

Kennedy was in New York last week at a Morgan Stanley conference where he rubbed shoulders with Coke's number two man in Atlanta, Jack Stahl.

Both men are understood to have been talking to shareholders promoting their individual agendas. Coca-Cola Amatil, which bottles in Australasia and parts of south-east Asia, took control of Coca-cola
Bottlers Philippines in 1997 in return for a 25% stake in the Sydney-listed company. The deal covered operations in the Philippines, South Korea and Indonesia.

But Coke in Atlanta and San Miguel, who jointly own 59% of CCA, want control returned to the Philippines. San Miguel made an offer, reportedly around $2.9 billion, last month but Kennedy is resisting efforts to break up the fastest growing part of his empire.

San Miguel wants more exposure to soft drinks and Coke is following a global strategy of returning control to local operators on the basis that they can achieve greater penetration of increasingly saturated markets.

San Miguel and Coke are thought to be discussing increasing their offer closer to the $3.6 billion book valuation.

But after the New York shindig a new theory is circulating in Sydney. San Miguel could take only part of the Asian business, probably the Philippines and South Korea, leaving Kennedy with the profitable
Indonesian arm.

Kennedy is unlikely to give up without a fight but he may be aided by Philippino president Jose Estrada, who has got himself into hot water with possible impeachment proceedings. Coke tends to steer clear of controversy and may but the deal on the back burner until Philippino domestic politics settles down again.

This would give CCA more time to improve performance in Asia which would make it significantly more difficult for San Miguel and Coke to claim local control would be better.

The signs are already there that the region is rebounding with CCA reversing profit warnings to predictions that profit for 2000 will be in line with last year's $190.2m. The situation in the Philippines, where volume has dropped over the last two years, is improving and profit should exceed 1999's $62m - predictions earlier this year were for $55m. Indonesia is also performing well accounting for 27% of Asian profits but only 13% of revenue.

CCA is also looking at new strategies in its traditional Australian market with new raspberry, lime, passionfruit and pineapple flavours for Fanta.

It is also introducing a new energy drink called Burn aimed at night clubbers more familiar with drinks like Red Bull. CCA will also launch the Pump water brand, which was a massive success when launched in New Zealand in 1996.

David Robertson

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