Business World

Tuesday 27 June 2017

Coca-Cola agrees to buy bottler's North American operation

Andrew Dunn

Coca-Cola has agreed to buy the North American operations of bottler Coca-Cola Enterprises.

Coca-Cola Enterprises shareholders will get $10 a share and one share in the new bottling company, Coca-Cola said today in a statement.

Coca-Cola will also assume $8.88bn of Coca-Cola Enterprises’ debt and all its North American assets and liabilities.

Coca-Cola Enterprises agreed to buy Coca-Cola’s bottling operations in Norway and Sweden and will have the right to buy Coca-Cola’s stake in its German bottling operations.

The deal follows Pepsi’s move to bring its bottling operations in-house as both companies try to reduce expenses and turn around the US market, where soft-drink volume sales have declined since 2005.

Coca-Cola Chief Executive Officer Muhtar Kent has introduced new packaging and pricing for Coca-Cola in North America to draw customers in addition to cutting supply-chain costs.

As of yesterday’s close, Coca-Cola Enterprises had a market value of $9.4bn. The stock soared 27pc to $24.35 in extended trading.

Coca-Cola and Pepsi sell beverage concentrate and syrup to licensed bottlers, which add water and other ingredients, put the mixture in bottles and cans, and sell it.

In 1999, Pepsi followed Coca-Cola’s lead by spinning off its capital-intensive bottling operations to create Pepsi Bottling Group. Coca-Cola currently owns about 34pc of Coca-Cola Enterprises.

Pepsi, the second-largest soft-drink maker, agreed in August to take control of its two biggest bottlers for about $7.8bn.

Those purchases may allow Pepsi to garner about $400m annually from cost savings and improved revenue opportunities, the company said this month.

North American volume at Coca-Cola Enterprises declined 5pc last year, while net pricing per case increased 6.5pc, the company said in a February 10 earnings report.

Bloomberg

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