Warren Buffett is no stranger to big deals, but could he really take over Coca-Cola?

 

New York

Coca-Cola, the $180bn symbol of American capitalism and consumer culture, could soon find itself in the middle of a fight between shareholders who have different visions of what their company’s future should be.

In an ideal world, some, like shareholder David Winters, would prefer if Coca-Cola remained owned by the investing public and spread its dividends and wealth around.

Mr Winters claims, however, that others – who may include Coca-Cola’s biggest shareholder, Warren Buffett, with about 9 per cent of the stock – wonder if the company could be ripe for the riches offered by private ownership.

Mr Winters, whose fund holds a $105m (£62m) stake in Coca-Cola, objected strongly to the company’s executive pay plan earlier this year and urged Mr Buffett to support him – which Buffett eventually did … kind of.

Now Mr Winters claims that Mr Buffett’s Berkshire Hathaway could be planning to take Coca-Cola private eventually, perhaps with the help of the investment firm 3G Capital, and is concerned that it could be what he calls a “sweetheart deal” that could short-change other shareholders, if an auction is not held to attract the highest price.

The financial news TV channel CNBC reported that Mr Buffett denied a buyout of Coca-Cola was being planned.

Such a take-private buyout would in theory cost more than $200bn – several times bigger than any buyout in history – so most analysts have dismissed Mr Winters’ claims.

Spokesmen for Berkshire Hathaway, Coca-Cola and 3G all declined to comment.

So why is Mr Winters so suspicious?

Well, Mr Buffett teamed up with Jorge Lemann’s 3G Capital to take Heinz private in a $23bn deal last year. In Berkshire Hathaway’s annual report, Buffet said: “With the Heinz purchase, moreover, we created a partnership template that may be used by Berkshire in future acquisitions of size.”

And, Mr Winters notes, at Berkshire Hathaway’s shareholders meeting Mr Buffett said: “We haven’t bought Coca-Cola … yet.” Mr Buffett’s son Howard sits on the Coca-Cola board.

Mr Lemann is Brazil’s richest man and a legendary deal maker who took Burger King private in 2010.

Mr Winters has written to independent directors at Coca-Cola to express his concerns about a possible “sweetheart deal” without a “go-shop” period, like Berkshire’s purchase of Heinz. “Since Berkshire is Coca-Cola’s largest shareholder, owning greater than 9 per cent of the outstanding shares, and Warren Buffett’s son Howard serves as a director of both Coca-Cola and Berkshire Hathaway, we believe our concerns are valid.”

Of particular concern to Mr Winters is his claim that a buyout of Coca-Cola could trigger change-of-control provisions for the company’s top executives. Mr Winters claimed: “If such a deal were completed today, Coca-Cola chairman and chief executive Muhtar Kent alone would stand to reap a nine-figure payday.”

Tensions are running high. Most analysts are sceptical that a buyout worth more than $200bn could ever be done.

One Berkshire Hathaway shareholder, the hedge fund manager Whitney Tilson, said: “They are in no position to make a bid for it any time soon – at least five years, I’d guess… Coke is too big, the stock is too expensive, Berkshire and 3G’s war chest is depleted by the Heinz acquisition, and 3G will have its hands full with Heinz for at least a year or two.

“As a long-time Berkshire shareholder, I hope this deal happens someday, but I don’t think it’s likely.”

Asia’s rising debt burden will change risk equation

For anyone who thinks $200bn is a lot of money, how does $60 trillion sound?

That is the amount of debt and refinancing that Standard & Poor’s predicts companies around the world will seek out in the next five years. To be clear, that’s 60 thousand billion dollars of loans, bonds and other debt.

With investors looking for yield, companies around the world are tapping the debt capital markets like never before as well as seeking more traditional bank finance.

With such demand from investors for company debt, firms can lock in funding at very favourable interest rates.

All good news so far – but such a binge on debt doesn’t come without its risks, warns S&P, which is concerned about Asia-Pacific in particular.

It said corporate debt in Asia-Pacific – led by China – would exceed that of North America and Europe combined by 2016.

S&P said: “Without improved risk assessment among investors and a heightened awareness by regulators of contagion risk, some future financial stress could stem from Asia.”

China now has more outstanding corporate debt than any other country.

“We expect Asia-Pacific corporate issuers, particularly from China, to make up half of the $60trn in projected new and refinancing demand over the five years 2014-2018,” S&P said. “This implies heightened global corporate credit risk.”

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas