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One of the world’s largest Coca-Cola bottlers agreed to buy a controlling stake in another, creating a bottling giant in Africa in a transaction valued at about US$2,6 billion.
Coca-Cola HBC AG will buy 75 percent of Coca-Cola Beverages Africa from Coca-Cola Co and its other holder, Gutsche Family Investments, the companies said Tuesday.
Coca-Cola HBC shares fell as much as 4,7 percent in London after the company canceled a share buyback to help finance the deal.
The transaction creates the second-largest bottling partner for the caffeinated soft drink by volume and marks another step in which the US firm is moving away from the business of bottling.
Coca-Cola also sold a stake in its Indian bottling operations this year.
South Africa’s Gutsche family is getting paid in cash and shares, meaning it will have a 5,5 percent stake in Coca-Cola HBC.
Philipp Hugo Gutsche, the 84-year-old head of the family business, has served on Coca-Cola Beverages Africa’s board, and the family said it will continue its involvement through the holding.
Coca-Cola is diversifying to overcome sagging demand for carbonated soft drinks. Its bottling investments made up 13 percent of revenue last year, down from 52 percent almost a decade earlier. After the Africa sale closes next year, that number should drop to about 5 percent, Coke said.
Coca-Cola’s strategy over the years has hinged on outsourcing the capital and labour-intensive parts of the business, like bottling, to third parties.
Under license from Coca-Cola, which supplies the concentrate and shapes the strategy, its independent partners make the drinks, package them, hire trucks, distribute the products and market them in ways that appeal to local cultures.
The buyer, Coca-Cola HBC, aims to tap Africa’s growth opportunities and plans a secondary listing on the Johannesburg Stock Exchange, it said.
“It’s a vote of confidence in South Africa and the African continent,” chief financial officer Anastasis Stamoulis said on a conference call.
Philipp Hugo Gutsche built his father’s business from a relatively small company operating from the coastal city of Port Elizabeth, South Africa, through acquisitions of numerous Coca-Cola franchises in the country. Shortly after South Africa’s first democratic elections, it joined with Coca-Cola Co’s East Africa units.
The family also operates a real estate investment company and a local dairy.
At least two other billionaire families have emerged from partnering with Coca-Cola to bottle the beverage giant’s products. — Bloomberg
