SABMiller, Coca-Cola Strike Deal With South Africa Over Bottling Merger -- Update

By Saabira Chaudhuri

LONDON-- SABMiller PLC and Coca-Cola Co. have struck a deal with South Africa's government to help push through a long-pending merger of their bottling operations in parts of Africa.

In November 2014, Coca-Cola struck a deal to combine bottling assets with SABMiller and privately held Gutsche Family Investments to create a joint venture spanning 12 African countries and about 40% of Coke's soft-drink volumes on the continent.

SABMiller, which has since agreed to be acquired by Anheuser-Busch InBev NV, is slated to hold 57% of newly created Coca-Cola Beverages Africa and Coke will own 11.3%. The remainder will be owned by Gutsche, a major shareholder in Coke's African bottling operations.

However, the deal has yet to close as the South African government has harbored concerns about protecting jobs in the country.

SABMiller on Wednesday outlined the terms of its deal with the South African government, saying the new soft-drink bottling operation--which will be Africa's largest if approved--will keep employment at current levels for three years after the deal is approved. Layoffs of senior staff will be limited.

The company also agreed to invest 800 million South African rands ($54.34 million) to support farmers and help retailers, in addition to a number of smaller commitments like allowing small retailers to allot 10% of space in Coca-Cola coolers to the drinks of smaller competitors if needed.

As part of the 2014 bottling deal, Coke said it would pay $260 million for the world-wide rights to SABMiller's Appletiser, a carbonated apple juice, and the rights to another 19 nonalcoholic brands in Africa and Latin America.

Wednesday the companies agreed to sell 20% of shares in Appletiser South Africa to "appropriate black shareholders who will be expected to participate actively in the business" and to grow Appletiser's production in South Africa with an eye on exporting the product in Africa and beyond.

"I am very happy that we have reached this agreement and hope we now have a clear path to the conclusion of this transaction and the creation of Coca-Cola Beverages Africa," said Alan Clark, SABMiller's Chief Executive, in a statement.

South Africa's competition tribunal needs to approve the bottling merger for the deal to close. A hearing on the proposed merger kicks off May 9.

Wednesday's agreements come after last month AB InBev said it had reached an agreement with the South African government to create a $69 million investment fund and other commitments designed to help it secure regulatory approval in the country for its deal to buy SABMiller. The Belgian brewer's pending acquistion has created uncertainty around Coke's bottling arrangements in Africa since ABInBev is PepsiCo Inc.'s bottler in Latin America. Pepsi and Coke are arch rivals, while--to complicate things further--Coke is also often cited as being a possible acquisition target for AB InBev.

--Tapan Panchal contributed to this article

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

May 04, 2016 04:51 ET (08:51 GMT)

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