Coca-Cola Acquisition of CCE North America: Deal Structure

Coca-Cola’s Acquisition of CCE’s North American Operations

Deal Structure

The structure of the Coca-Cola/CCE deal follows in Exhibit 7. Coca-Cola will be relinquishing its 34% equity stake in CCE, valued at $3.4 billion approximately. Coca-Cola, in a position against the industry trend, owns a few bottling operations overseas. The company will offer the Norwegian and Swedish operations over to CCE, and an option for CCE to acquire an 83% stake in the major German bottling unit for fair value in 18-36 months post-deal closure. In exchange, CCE will be giving Coca-Cola all of its North American bottling operations, valued at roughly $3.4 billion, as well as $822 million in cash. There were no competing bids in this transaction, as no outside parties were aware the deal was in progress. Given the industry trend toward bottler consolidation, analysts surely might have expected this acquisition, though no other bidders were involved in the deal-making process.

The deal is largely thought to be at fair value. Exhibit 7 shows the equal valuations of CCE’s North American operations and Coke’s equity stake in the company, at $3.4 billion. Coca-Cola has also indicated the swap of $822 million for Coke’s Norway and Sweden bottling operations to be an equivalent component. The basis for this fair value swap lies in the relationship between the companies that has precipitated over the many years of both companies’ history. CCE realizes that virtually all of its success has been at the hand of Coca-Cola. Coke has helped the company merge with smaller bottling partners, and has continued to maintain franchising agreements with CCE that shareholders perceive as being very fair. As such, CCE would not have allowed a competitive bidding process to emerge for its North American unit. At the same time, a practical look at the deal points out that Coca-Cola could in the future refuse to renew the franchising contract with CCE. Should that happen, Coca-Cola would surely endure a massive blow to revenue, but with almost 200[ "About Us: Our Heritage: CCE Timeline: The Evolution of Coca-Cola Bottling and CCE." Coca-Cola Enterprises. Web. 29 Apr. 2011. http://www.cokecce.com/pages/allContent.asp?page_id=88 .] other independent bottling partners in the US alone, it’s likely the company could make up production elsewhere given time. CCE on the other hand, with no franchising contract with Coca-Cola, would face a complete shutdown and possible bankruptcy. Coca-Cola’s franchising model holds all the leverage, meaning that CCE really didn’t have much choice in this matter. Coke decided it was time to streamline operations by acquiring the bottler’s operations in the US and Canada, and CCE, wanting to maintain goodwill with the company, agreed to become entirely Europe-focused with the addition of two small bottling units in Norway and Sweden.

More posts from a paper on Coca-Cola M&A Activity (including merger with CCE):

Coca-Cola M&A Activity, CCE Acquisition: Executive Summary
Coca-Cola M&A Activity: Introduction
Coca-Cola M&A Activity: Product Trends
Coca-Cola M&A Activity: Demand and Economic Trends
Coca-Cola M&A Activity: Business Model Trends in the Beverage Industry
Coca-Cola M&A Activity: Beverage Industry Business Model Trends (2)
Coca-Cola M&A Activity: Company Strategic Objectives
Coca-Cola M&A Activity: Company Strategic Objectives (2)
Coca-Cola M&A Activity: Company Portfolio Analysis
Coca-Cola M&A Activity: Company Portfolio Analysis (2)
Coca-Cola M&A Activity: Company Portfolio Analysis (3)
Coca-Cola M&A Activity: PepsiCo M&A Portfolio Analysis (Largest Competitor)
Coca-Cola M&A Activity: PepsiCo M&A Portfolio Analysis (Largest Competitor) (2)
Coca-Cola M&A Activity: Other Beverage Industry M&A Activity
Coca-Cola Acquisition of CCE North America: Deal Structure
Coca-Cola Acquisition of CCE North America: Deal Structure (2)
Coca-Cola Acquisition of CCE North America: Major Legal and Financial Players
Coca-Cola Acquisition of CCE North America: Regulatory and Shareholder Approval of the Transaction
Coca-Cola Acquisition of CCE North America: Implementation Analysis: Likelihood of Acquisition Success
Coca-Cola Acquisition of CCE North America: Implementation Analysis: Likelihood of Acquisition Success (2)
Coca-Cola Acquisition of CCE North America: Conclusion to M&A Deal Analysis
Coca-Cola CCE Merger: Table of Contents and Works Cited List