Coca-Cola European Partners Plc has agreed to buy Australian bottler Coca-Cola Amatil Ltd., creating a global producer of packaged beverages to better withstand a slowdown in the industry and the shift away from sugary drinks.
The deal values Sydney-based Coca-Cola Amatil at A$9.23 billion ($6.6 billion), a 19% premium to where its shares traded last week. The target’s board intends to unanimously recommend the offer.
The A$12.75-per-share cash deal would double the European company’s potential market at a stroke, putting almost 300 million consumers within reach in the Southern Hemisphere, including the key developing nation of Indonesia.
Such growth opportunities are all the more attractive in an industry facing slowing sales, partly due to the coronavirus pandemic, but also amid a broader shift by health-conscious consumers away from sugary drinks. Beyond fizzy staples like Coca-Cola, Fanta and Sprite, the Australian company has diversified into whiskey, rum and tequila, as well as beer and ground coffee.
Damian Gammell, chief executive officer of Coca-Cola European Partners, said the acquisition would create “a broader and more balanced geographic footprint” that will “enable us to scale up even faster.”
Coca-Cola Amatil has 32 production facilities in Australia, New Zealand, Fiji, Indonesia and Papua New Guinea, according to its website. The company changed its structure last year around more geographically-focused units.
The proposed acquisition, the largest deal involving an Australian company so far this year, would mark the first major cross-border transaction in the country since the pandemic curtailed much of the year’s merger activity.
Coca-Cola Amatil stock soared 16% to close at A$12.50 in Sydney, shy of the offer value. The deal is subject to due diligence by Coca-Cola European Partners.
“It’s not a once-in-a-lifetime bid, but it’s around the right price for Amatil shareholders,” said Daniel Mueller, a fund manager at Vertium Asset Management in Sydney, which owns Coca-Cola Amatil shares. “It’s a very difficult stock to take over without the parent’s permission, so getting a control premium is an achievement.”
It’s a sensible time to buy Coca-Cola Amatil from an earnings perspective, as drinks demand should benefit from an easing of Covid-19 restrictions in Australia, Mueller said.
Coca-Cola European Partners will enter a separate agreement to buy Atlanta-based Coca-Cola Co.’s 31% stake in the target on less favourable terms than those offered to other shareholders.
It will pay Coca-Cola A$9.57 a share in cash for 11% of the Australian company, and also work with Coca-Cola to buy its remaining 20% stake.
Coca-Cola European Partners is the world’s largest Coca-Cola bottler by revenue, with 48 production sites in Germany, Spain, Great Britain and elsewhere, according to its website.
It was created from the three-way merger of Coca-Cola Enterprises Inc., Coca-Cola Iberian Partners and Germany’s Coca-Cola Erfrischungsgetranke AG in 2015.
The biggest shareholder is Cobega, an investment vehicle belonging to Spain’s Daurella family, followed by Coca-Cola Co., Bloomberg data show.
The European bottler decided early this year to halt its buyback program and defer a dividend to preserve cash.
Coca-Cola Amatil has been named as a potential bidder for Australian liquor assets being sold by Japan’s Asahi Group Holdings Ltd., which could require a capital raise, according to analysts at Citigroup Inc.