Coca-Cola European Partners acquires Coca-Cola Amatil
Australia | One day Coca-Cola Amatil (CCA) was in the news over rumours it will buy Asahi’s sell-off brands, the next day it was the target of a takeover offer itself.
On 4 November 2020 Coca-Cola European Partners (CCEP) said it entered into an agreement to buy 69 percent of CCA from investors, as well as the remaining 31 percent from The Coca-Cola Company. Reportedly, the deal values CCA at AUD 9.23 billion (USD 6.6 billion), which represents a 19 percent premium to where its shares last traded. Including CCA’s debt, its enterprise value is AUD 10.9 billion.
CCA is a bottler and distributor of non-alcoholic and alcoholic beverages as well as coffee drinks in the Asia Pacific region. It operates in Australia, New Zealand, Indonesia, Papua New Guinea and Fiji. It posted an EBITDA of AUD 1.0 billion (USD 710 million) in 2019 on revenue of AUD 5.1 billion.
There are five major Coca-Cola bottlers in the world. CCA focuses on the Asia-Pacific region, whilst the European Partners group was formed in 2016 following a merger of three Western European Coke bottlers. Operating in 13 European countries, CCEP had a turnover of USD 14 billion in 2019. The Coca-Cola Company has a 19.5 percent stake in CCEP.
Go for it
CCA’s board unanimously recommended the offer – in “the absence of a superior proposal”, as CCA’s CEO Alison Watkins said.
CCEP justified the acquisition by saying it would create a “broader and more balanced footprint for CCEP, whilst almost doubling CCEP’s consumer reach, with the aim of ultimately driving sustainable and faster growth through geographic diversification and scale”.
In plain English, both CCEP and CCA are stuck in mature markets: Europe for CCEP and Australia/New Zealand for CCA. Growth has proven a slog and both their share prices tumbled this year. However, CCA has a foot in the door to Indonesia, which is one of the world’s most populous markets. With 270 million inhabitants, Indonesia ranks fourth behind China, India and the United States. Adding Indonesia to its footprint will allow CCEP to capture its forecasted growth.
Moreover, analysts believe that CCA will give CCEP an edge in expanding into alcoholic beverages (e.g. beer) and broadening its reach into coffee.
