Coca-Cola Co is in talks to buy most of its largest bottler for roughly $15 billion, including debt, marking a shift in its strategy to keep its bottling operations separate, a person familiar with the situation said yesterday.
If the deal goes through, Coke would buy Coca-Cola Enterprises Inc's North American operations. Meanwhile, the rest of the bottling company would remain independent and would acquire some Coca-Cola assets in Scandinavia and Germany, the source said.
The North American operations represent the bulk of Coca-Cola Enterprises's business, accounting for 70 per cent of its net operating revenue in 2009, according to a report by the Wall Street Journal.
The deal could be announced as early as this week since the boards of both companies were evaluating the transaction last night, the source said. Talks could still break down and a deal could fail to materialise, said the source. The source, who was not authorised to speak with the media, declined to be named.
Coca-Cola and Coca-Cola Enterprises could not be reached immediately for comment.
Such a deal would represent an about-face for Coca-Cola, which pioneered the model of separating the bottlers from the concentrate company decades ago. It also would follow a similar deal by rival PepsiCo Inc, which is aiming to close on the $7.8 billion acquisition of its two largest bottlers this week.
Since PepsiCo first launched its bid for its bottlers in April, with the aim of streamlining its decision-making, cutting costs and reducing tension between it and the bottlers, analysts and investors have questioned whether Coke would have to follow suit.
Tom Pirko, founding partner of beverage industry consultants Bevmark LLC, who has advised Coca-Cola in the past, described the possible move by Coke as something the company has to do because of the evolving nature of the US soft drink market and the move by PepsiCo, rather than something it wants to do.
"This is a tit-for-tat business. They're responding," Mr Pirko said. "This is something that they've been publicly committed to not doing. It's something they're getting pulled into."
Coke chief executive Muhtar Kent has repeatedly expressed his commitment to the current franchise system, where it sells beverage concentrate to a network of independent bottlers that mix the drink, bottle it, and distribute it.
Coke is both the largest supplier and the largest shareholder of Coca-Cola Enterprises with a roughly 35 per cent stake.
Reuters