Coca-Cola European Partners (CCEP) is all but set to strike a $9.23 billion deal to buy Australia’s Coca-Cola Amatil in what is shaping up to be the biggest corporate deal in the country this year, according to Bloomberg data.
CCEP has been in talks to buy the Australian company since Saturday, and this would mark the first major cross-border acquisition since the pandemic hit.
In a statement, CCEP said it would be buying 69.2 per cent of shares of Coca-Cola Amatil for $12.75 per share, while the remaining 31 per cent stake will be bought through a separate agreement “on less favourable terms”.
CCEP’s purchase will increase its global footprint of 48 production sites across Europe even further.
Coca Cola Amatil’s board of directors intends to unanimously recommend the scheme to shareholders.
The deal comes as soft drink makers grapple with slowing sales as well as a long-term trend of increasingly health-conscious consumers shifting away from sugary beverages.
The whole deal is just shy of being inked, but is pending due diligence and the agreement of a scheme implementation deed, which will set out the exact terms on which the shares will be acquired.
“Based on the current price and conditions of the proposal, it is now in the best interest of independent shareholders to allow CCEP to undertake confirmatory due diligence and further negotiate transaction documentation in order to determine if a binding proposal can be presented to independent shareholders,” said Coca-Cola Amatil chairman Ilana Atlas.
Shareholders need not take any action at this stage, Coca-Cola Amatil advised.
What this means for Aussie customers
The acquisition is big news, particularly in the corporate world. But what does it mean for the economy? Will the cost of your Coke rise any time soon? Will we see any Aussie jobs lost as a result?
According to IBISWorld senior industry analyst Yin Yeoh, we’re not staring down the barrel of bad news for the national economy, and the sale could actually be a positive.
“Foreign ownership in Australian businesses [and] foreign buyers of distressed Australian assets can be a good thing – [it] prevents distressed businesses from going into bankruptcy,” Yeoh told Yahoo Finance.
“Some businesses need capital investment that is often not available within the country, and foreign investment can help businesses to expand. For example, foreign investment in Australian agriculture sector has been around for decades.”
The sale means Coca-Cola Amatil joins forces with CCEP, which is the world’s biggest Coca-Cola bottler by revenue.
“A merger could boost CCA’s purchasing power for raw material inputs, such as sugar, syrup, plastic bottles and could be beneficial for the company.”
The deal is also less likely to trigger job losses than the destabilising effect of Covid-19, though Yeoh did note corporate restructuring and automation as other factors.
And, finally, product prices don’t seem likely to rise as a result of the deal.
“Beverage products are highly competitive and prices are dependent on the retail environment, consumer demand – consumers moving towards private label alternatives,” said Yeoh.
“Coca-Cola Amatil has been hit hard by the pandemic, which drastically reduced high-margin sales in convenience channels and the food-service sectors.
“The company is also battling a long-term decline in sales of full-sugar soft drinks and bottled water. [The mergers and acquisitions] deal is unlikely to affect product prices.”
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