Daily Management Review

$6.6 Bln Buyout Offer For Australia Bottler Made By Coca-Cola's European Partner


$6.6 Bln Buyout Offer For Australia Bottler Made By Coca-Cola's European Partner
An approach to purchase Australian peer Coca-Cola Amatil Ltd has been made by the Coca-Cola Co’s European bottler in a proposed deal worth A$9.28 billion ($6.6 billion).
This cut-price buyout proposal has also been supported by the target firm because of the overall economic uncertainty due to the novel coronavirus pandemic.
If the deal goes through, it would be the biggest deal involving an Australian company. However the Australian company has been priced at a valuation which is lower than its market value as reported in February, prior to the global economy being rocked by the Covid-19 pandemic and the world economy being plunged into recession,
Indications of beliefs that an economic recovery because of the pandemic could take years, which is a bleaker view compared to what some local economists have pointed to of economic improvement indicators, is reflected in the support of the deal from the Australians.
Since March, shutdowns of restaurants and pubs because of the pandemic, has hit profits of Coca-Cola Amatil.
The country’s second most-populous state, Victoria, is only now starting to allow dine-in food retailers to open after a new wave of infections prompted a second shutdown.
“We are really confident about the recovery that the business is making (but) clearly there’s uncertainty over the next couple of years with the economic situation, and just the risk of further health outbreaks that could disrupt the business,” said Coca-Cola Amatil Chief Executive Alison Watkins on an investor call on Monday when asked about the price.
With the new of the proposed buyout emerging, the stocks of Coca-Cola Amatil spiked by as much as 15 per cent to A$12.31 during morning trading on Monday but was still below the proposed offer price of A$12.75. That indicated that investors had also considered the possibility of the deal not going through.
The share price of the company closed at A$13.07 on February 20 but traded below A$8 a month later because of widespread market gyrations caused by the lockdown in many parts of Australia.
But as Australia relaxes restrictions and new case numbers decline, the stock has been steadily rising along with the broader market.
The deal would be “in the best interests of the shareowners of both companies and of the Coca-Cola system overall”, said a spokesman for the Coca-Cola Co which has a 31 per cent stake in the Australian company and a 19 per cent stake in London-listed Coca-Cola European Partners PLC (CCEP).
Before making a binding offer, due diligence will be conducted by the Australian company, said CCEP. Approval from Australia’s Foreign Investment Review Board will also need to approve of the deal. The powers of the Foreign Investment Review Board were increased this year to disallow overseas deals that are deemed to be a security or supply chain risk for Australia.
The deal would almost double its consumer reach, “ultimately driving sustainable and faster growth, through geographic diversification and scale,” CCEP said in a statement.