Coca-Cola Beverages in pounds 4.3bn merger talks

COCA-COLA BEVERAGES, the underperforming soft drinks bottler, surprised the stock market yesterday with the announcement that it is in talks regarding a pounds 4.3bn merger with Hellenic Bottling Company of Greece.

The announcement, brought forward after leaks on the Athens Stock Exchange, would effectively be a reverse takeover of the Greek company by Coca-Cola Beverages. UK shareholders would swap their London-listed shares for a stake in the new group, which would only be listed in Greece.

Although CCB shareholders would be minority shareholders in the merged group, with a stake of 44 per cent, Neville Isdell, the UK company's chief executive, would emerge in charge of the enlarged company.

CCB shares, which were priced at 160p when the group came to the market a year ago, shot up by 31p on the news. But at 145.5p they are still well below the issue price, valuing the company at pounds 1.5bn.

The structure of the deal brought criticism from UK analysts and fund managers. Under the merger terms UK shareholders would receive one new share in the new Hellenic company for every 9.5 shares held.

But the partial share alternative values the CCB shares at just 150p per share. Not only is this below the issue price, but it is also significantly below the 180p implied by the Hellenic share price in Athens yesterday.

UK analysts further criticised the deal, saying that the main beneficiary would be the US Coca-Cola company, which controls 51 per cent of CCB shares. It is thought that the merger has been driven by the Atlanta-based company, which wants to see consolidation among its bottlers.

The US group has been under pressure to consolidate CCB's figures on its balance sheet rather than to treat it as an associate. "We would question the benefits for smaller shareholders," one analyst said.

However, it is thought that the new company would be keen to return to the London market soon, with London as its primary listing.

Coca-Cola Beverages said the merger would create a major new bottling force for Coca-Cola, with operations spanning 22 countries.

CCB's strongholds in Europe are in Austria, Hungary and Italy as well as in a string of counties hit by this decades series of Balkan crises, such as Bosnia and Croatia, and in the Czech Republic.

Hellenic's main markets are Greece, Russia and Romania.

The company has mooted factory and head office synergies, although analysts said these might be limited.

Coca-Cola Beverages hit problems almost as soon as it came to the market last year; it was affected by the falls in world stock markets as well as the Russian crisis.