Three bottlers of Coca-Cola Co. products in Europe are in
advanced talks for a merger that would further a push by the U.S.
soda giant to consolidate its bottlers around the world and lower
costs.
Coca-Cola Enterprises Inc. is discussing a tie-up with Coca-Cola
Iberian Partners and Germany's Coca-Cola Erfrischungsgeträ nke AG,
according to people familiar with the matter. Terms of the
potential deal couldn't be learned, but it is likely to be valued
well into the billions of dollars.
Atlanta-based Coca-Cola Enterprises, a big, independent Coke
bottler in Western Europe, has a market value of $10.8 billion.
Coca-Cola Iberian Partners, also independent of Coca-Cola, is
closely held. Coca-Cola owns the German business.
As with all merger talks, and especially complicated ones such
as these, it is possible they could fall apart before a deal is
reached.
The deal would fit into a pattern of recent activity on Coke's
part. Amid falling soda sales in many of its markets including
Europe as consumer tastes migrate toward healthier fare, the
company has been seeking to merge its smaller overseas bottlers
into bigger, more efficient operations that will be better able to
market and advertise Coke and other beverages and have more
flexibility in pricing and packaging. Consumers have been moving
away from high-calorie soft drinks toward bottled water, energy
drinks and teas, taxing smaller, less efficient and flexible
bottlers.
Coke has simultaneously been grappling with the refranchising of
its North American bottlers, which has been expensive and slow to
pay-off.
Coke produces concentrates that it distributes to hundreds of
mostly independent bottling partners across the globe. Making and
selling concentrate is a higher-margin and less-capital-intensive
business than bottling the soft drinks.
In 2013, the Atlanta beverage giant helped negotiate a merger
between seven Spanish and one Portuguese Coca-Cola bottlers,
creating the Iberian Partners business. The same year, it sold its
bottling assets in the Philippines to Coca-Cola Femsa SAB, its
Mexican bottler. And last year, it helped forge a deal to combine
bottling operations in Southern and Eastern Africa into one serving
12 countries.
Coca-Cola Enterprises was created in its current form after Coke
bought in its North American operations in 2010. It is the sole
licensed bottler for Coca-Cola products in Belgium, continental
France, Great Britain, Luxembourg, Monaco, the Netherlands, Norway
and Sweden.
Second-quarter revenue at CCE dropped 17.5% from the
year-earlier quarter to $1.9 billion, the company reported
Thursday. Chairman and Chief Executive John F. Brock attributed the
weakness to a consumer environment in Europe that is crimping
demand in the nonalcoholic, so-called ready-to-drink category.
Amid the softness, Coca-Cola Iberian Partners tried to lay off
workers last year, but Spain's Supreme Court ruled that the company
had to rehire employees and provide back pay. The company is owned
by Spanish families, who have been partners with Coca-Cola since
1951.
The European bottler tie-up would come amid other big-deal
activity among consumer companies in the strongest
mergers-and-acquisitions market in years. This month, Kraft Foods
Group Inc. completed a merger with H.J. Heinz Co. valued at roughly
$50 billion. Earlier this month, Coty Inc. agreed to buy a number
of beauty brands from consumer giant Procter & Gamble Co. for
$13 billion.
Tripp Mickle contributed to this article.
Write to Shayndi Raice at shayndi.raice@wsj.com, Dana Mattioli
at dana.mattioli@wsj.com and Betsy Morris at
betsy.morris@wsj.com
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