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Business

Coca-Cola to buy North American bottling operations

Text by News Wires

Latest update : 2010-02-25

Coca-Cola says it will buy the North American operations of its largest bottler, Coca Cola Entreprises, in return for the sale of its own bottling operations in Norway and Sweden.

AFP - Coca-Cola announced plans Thursday to take over the North American operations of its largest bottler, gaining control of production and distribution in a market shifting away from carbonated drinks.
   
Coke said it would acquire the North American operations of its largest bottler, Coca-Cola Enterprises (CCE).
   
The cashless deal also called for Coca-Cola to sell its bottling operations in Norway and Sweden to CCE. At the close of the agreement, Coca-Cola Co. would have direct control over approximately 90 percent of total North American volume.
   
The acquisition of the bottler's North American assets and liabilities would consider Coca-Cola's current 34 percent stake in CCE, valued at 3.4 billion dollars, and assume 8.88 billion of CCE debt.
   
A company spokesman said the total value of the transaction was between 12.5 and 13.0 billion dollars, depending on various factors.
   
Concurrently, the deal would see CCE buy Coca-Cola's bottling operations in Sweden and Norway for 822 million dollars, subject to the signing of definitive agreements.
   
The bottler would have the right to acquire Coca-Cola's 83 percent stake in its German bottling operations at a later date.
   
"This is a truly historic day for the Coca-Cola system," Coca-Cola chairman and chief executive Muhtar Kent said in a statement.
   
"Importantly, the creation of a unified operating system will strategically position us to better market and distribute North America's most preferred nonalcoholic beverage brands."
   
The move followed rival PepsiCo's announcement last year to acquire two of its key bottlers for a more fully integrated distribution system.
   
PepsiCo chief executive Indra Nooyi said at the time that "the fully integrated beverage business will enable us to bring innovative products and packages to market faster, streamline our manufacturing and distribution systems and react more quickly to changes in the marketplace."
   
Analyst Mark Greenberg at Deutsche Bank said the move by Coke is "validating Pepsi's view that a franchise system was unworkable domestically."
   
The move comes amid dramatic changes in the soft-drink business, with US consumers shifting away from carbonated beverages to bottled water, juices, sports drinks and energy drinks.
   
Coke reported that in 2009 total beverage case volumes rose 3.0 percent, but most of that was in the non-carbonated segment, such as its Dasani water and Fruitopia and Minute Maid juices.
   
CEO Kent, speaking to CNBC television, said that "consumers are changing rapidly everywhere around the world, not just here in the United States. Consumers are changing in China. Consumers are changing in Russia. Consumers are changing in Western Europe and Latin America.
   
With the acquisition, he said, "we will have sufficient amounts of synergies and I call it fuel for our brands that will ensure we keep winning in the marketplace."

Date created : 2010-02-25

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