Coca-Cola to Acquire SABMiller's Former Stake in Africa Soda Bottling -- 2nd Update
October 10 2016 - 07:56PM
Dow Jones News
By Mike Esterl and Tripp Mickle
Coca-Cola Co. said Monday that it would exercise a
change-of-control clause, allowing it to acquire SABMiller PLC's
former interest in the soft-drink company's largest African
bottling company.
The move comes after Anheuser-Busch InBev NV on Monday closed
its acquisition of SABMiller to create a beer behemoth with a large
African footprint. As of late August, SABMiller had a 54% stake in
Coca-Cola Beverages Africa, which distributes about 40% of Coke's
volumes in the continent.
Atlanta-based Coke wants to keep AB InBev at arm's length amid
speculation the Belgian beer giant eventually could try to acquire
Coke. AB InBev also is a major bottler of nonalcoholic drinks in
Latin America for PepsiCo Inc., Coke's longtime rival.
Coke said it is negotiating with potential buyers who could
acquire some or all of SABMiller's former interest in the African
bottling business. The soft-drink company and South Africa-based
Gutsche Family Investments, another longtime bottling partner,
owned minority stakes in Coca-Cola Beverages Africa.
"While the company respects [AB InBev's] capabilities, it has a
number of existing partners who are highly qualified and interested
in these bottling territories," Coke said in a company
announcement.
Coke has been divesting manufacturing and distribution assets
world-wide, part of an "asset light" strategy to focus on its more
profitable concentrate business at a time when soda consumption is
slowing.
Industry analysts have flagged European-based Coca-Cola European
Partners PLC and Coca-Cola Hellenic Bottling Co. or Mexico's
Coca-Cola Femsa SAB as being among potential partners in Africa.
Coke has hundreds of bottling partnerships around the world.
A Coke spokesman declined to comment on potential partners.
Despite Coke's decision to exercise the change-of-control clause
for Coca-Cola Beverages Africa, AB InBev will continue to have some
interest in Coke bottling operations. The brewer's deal for
SABMiller gives it a 20% interest in France's Castel Group, which
bottles Coke products in more than a dozen African countries,
including Algeria and Tunisia.
The company also retains SABMiller's soft-drink bottling
businesses with Coke in El Salvador and Honduras, which account for
less than 1% of Coke's volume. A Coke spokesman said those
agreements would be handled separately at a later date.
Coke typically insists on change-of-control clauses with its
bottling partners, giving Coke the right to buy out a partner's
share if the partner is acquired by someone else.
SABMiller's equity stake in the African bottling venture is
estimated to be valued at about $4 billion, according to Sanford C.
Bernstein analysts.
Coca-Cola Beverages Africa began operations in July, initially
spanning 11 countries with plans to expand to 14 countries. It is
based in South Africa, with more than 30 bottling plants spanning
southern and eastern Africa.
When Coke announced its three-way partnership in late 2014 with
SABMiller and Gutsche, it estimated the new bottling entity had
$2.9 billion in annual revenue and $505 million in earnings before
interest, tax and amortization.
Write to Mike Esterl at mike.esterl@wsj.com and Tripp Mickle at
Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
October 10, 2016 19:41 ET (23:41 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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