By Prudence Ho in Hong Kong and Mike Esterl in Atlanta
Coca-Cola Co. has agreed to buy a Chinese drinks business, its
first attempt to buy a mainland firm after a high-profile rejection
by Beijing of its bid for a maker of juices and nectars six years
ago.
The Atlanta beverage giant is buying the beverage business of
China Culiangwang Beverages Holdings Ltd. for an enterprise value
of $400.5 million, the companies confirmed Friday. Culiangwang
specializes in "multigrain beverages" with flavors such as red
bean, walnut and oats.
Coke has been acquiring makers of juice, water, and other
noncarbonated drinks around the world in recent years to broaden
its portfolio and jump-start slowing sales. Many still-beverage
categories are growing faster than soda, which represents about 70%
of Coke's sales. Last year company volumes rose just 2%, the second
straight year the company fell short of its growth target.
China remains a key growth market for Coke, which has 43 plants
in the country after investing billions of dollars in recent years.
But its sales in China also have slowed after several years of
double-digit growth. Coke's China volumes rose just 4% in volume
terms last year, including a 3% decline in the fourth quarter.
"The proposed acquisition is in line with Coca-Cola China's
strategy to continue providing a diverse range of beverage products
to Chinese consumers, with plant-based protein drinks representing
a growing beverage category in China," Coke said in a
statement.
Coke's attempt to bulk up in China through a $2.4 billion bid
for juice maker China Huiyuan Juice Group Ltd. in 2009 was turned
down by China's Ministry of Commerce on antitrust grounds. The
Huiyuan deal would have been the largest takeover by a foreign
company of a Chinese food or beverage maker.
The deal to buy China Culiangwang's multigrain drinks operations
is also subject to approval by the Ministry of Commerce.
A Coke spokesman declined to comment on whether the company
expects the deal to be approved, but noted it is much smaller than
the blocked Huiyuan acquisition. Coke also doesn't have a
multigrain business in China, although it is a big juice
player.
China Culiangwang said it expects to book a gain of 1.12 billion
yuan ($181 million) from the disposal and will use the net proceeds
to repay the outstanding bonds and other debt. The company, whose
market capitalization is $231 million, has seen its shares soar
112% this year.
Standard Chartered advised China Culiangwang on the deal.
Drinks like China Culiangwang's multigrain beverages, branded as
health drinks, sell well in the country. China Culiangwang said its
multigrain beverage business's unaudited net profit on a pro forma
basis was 193 million yuan in 2014, up 17% from 164.9 million yuan
in 2013, it said in its filing. Apart from multigrain beverages,
China Culiangwang sells snacks, biscuits and cereals.
Coke's strategy until now has been to largely stick to bolt-on
acquisitions. But last year it agreed to pay about $4 billion
combined to buy minority stakes in U.S. energy drink maker Monster
Beverage Corp. and U.S. coffee-machine maker Keurig Green Mountain
Inc.
Its biggest recent overseas deal was in 2012, when it paid
roughly $980 million to acquire about half of Aujan Industries, a
large still beverage company in the Middle East. Last year it
teamed up with bottling partner Arca Continental to acquire the
majority of Tonicorp, a leading dairy company in Ecuador, for an
undisclosed amount.
Write to Prudence Ho at prudence.ho@wsj.com and Mike Esterl at
mike.esterl@wsj.com
Access Investor Kit for China Culiangwang Beverages Holdings
Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=BMG2117V1000
Access Investor Kit for China Huiyuan Juice Group Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=KYG211231074
Access Investor Kit for China Huiyuan Juice Group Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US16948N1000
Access Investor Kit for The Coca-Cola Co.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US1912161007
Access Investor Kit for Continental Resources, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US2120151012
Subscribe to WSJ: http://online.wsj.com?mod=djnwires