London listing on the cards for Coca-Cola's UK bottling arm
US firm to bring North American bottling in-house as fizzy drink sales flatten
Coca-Cola's European bottling business, headquartered in Uxbridge, is considering an £8bn London listing after splitting off from its North American sister company.
Coca-Cola decided yesterday that it would take its North American bottling operation in-house, following a similar move by rival Pepsi, but Coca-Cola Enterprises (CCE) will remain as a standalone company, with the bottling franchises for much of Western Europe.
CCE is currently listed on the New York Stock Exchange, but executives said it will begin examining a London Stock Exchange listing, after the restructuring is complete. The hiving off of the North American arm will allow CCE to "reinforce" its headquarters in the UK, said Hubert Patricot, the European division president. "We are a key employer in Great Britain and our plant at Wakefield is one of Coca-Cola's top two worldwide plants."
CCE employs 4,500 people in the UK, bottling Coke, Sprite and Fanta products, as well as Schweppes lemonade and Oasis fruit drinks. It also has operations in France, Belgium and Luxembourg, and it will buy Coca-Cola's Norwegian and Swedish bottling operations – and have the right to buy a controlling stake in the German bottler, too – under the terms of yesterday's deal.
Coca-Cola, whose global headquarters are in Atlanta in the US, was stung into action by Pepsi's decision last year to buy its two largest bottlers for $7.8bn, from which it expects to reap more than $600m in cost savings. Coca-Cola said it would be able to make $350m of savings over four years by integrating the North American arm of CCE. Both companies are increasingly reliant on still and fruit drinks for growth in the West, where health concerns have undermined the popularity of fizzy drinks.
"Our North American business structure has remained essentially the same since CCE was founded in 1986, while the market and industry have changed dramatically," said Muhtar Kent, the Coca-Cola chief executive. "With this transaction, we are converting passive capital into active capital, giving us direct control over our investment in North America."
Coca-Cola is giving up its 34 per cent stake in CCE and taking over almost $9bn of CCE's debts, in return for acquiring all of its North American plants and other assets. CCE shareholders will get a one-off payment of $10 per share when the deal closes. Its stock soared by one-third to $25.53 in early trading in New York, valuing the company at $12.6bn (£8.2bn).
The deal came as a surprise to investors, because Mr Kent had recently reaffirmed his commitment to the franchise bottler model, in which Coca-Cola sells concentrate to franchisees around the world. Mr Patricot said that "the North American model is the exception that proves the rule" and that Coca-Cola will continue to rely internationally on local entrepreneurs to develop plants and salesforces.
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