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Coca-Cola to Refranchise Some US Bottling Operations.


27 May 2016 - US-based soft drinks maker The Coca-Cola CO (NYSE: KO) has signed letters of intent to refranchise bottling operations that serve a large area of the United States, and is partnering with Mexican bottler Arca Continental SAB, the company said.

The transactions include territories in Texas and parts of Oklahoma, New Mexico and Arkansas, which is an area currently known as the Southwest operating unit of Coca-Cola Refreshments.

Under letters of intent, The Coca-Cola Co will contribute the Southwest operating unit, including distribution and production operations, in exchange for a 20% equity stake in a new, privately held entity.

This entity, AC Beverages, will also include all of Arca Continental's existing beverage businesses in Latin America. Arca Continental, which is based in Monterrey, Mexico, will continue to be publicly traded on the Mexican Stock Exchange.

Coca-Cola Bottling Co. United, based in Birmingham, Alabama, will become a joint-venture partner in the US operations of AC Beverages.

Arca Continental will have the majority stake in this US joint venture, where both companies will work hand-in-hand with local teams in a solid partnership to benefit the important markets in which they participate.

United will acquire from The Coca-Cola company the majority of its remaining territory in Oklahoma. United will contribute that territory, along with cash, to its US joint venture with AC Beverages. United will continue to independently operate all of its other territories, which are outside of its joint venture with AC Beverages.

Separately, Ozarks Coca-Cola Bottling Co of Springfield, Mo., has signed a letter of intent to acquire territories owned by The Coca-Cola company in northwest Arkansas and small areas in Kansas and Oklahoma.

The letters of intent mark another key milestone as The Coca-Cola Co continues to refranchise company-owned North American bottling territories. This work is expected to be completed by the end of 2017.

Currently, Arca Continental is the second-largest Coca-Cola bottler in Latin America and the third-largest independent bottler in the world in terms of unit case volume.

The AC Beverages/United joint venture will be based in the United States.

It will become a member of the National Product Supply Group. The NPSG, as previously announced, will administer key activities for member bottlers, including production of cold-fill beverages.

The NPSG is governed by a board comprised of representatives from its current members, which are Coca-Cola North America, Coca-Cola Refreshments, Coca-Cola Bottling Co. Consolidated, Coca-Cola Bottling Co United and Swire Coca-Cola, USA.

The AC Beverages/United joint venture will own 11 cold-fill production facilities. Nine are in Texas. Those facilities are located in El Paso, Dallas, Fort Worth, San Antonio, McAllen, Abilene and Nacogdoches, plus two in Houston. The other two facilities are in Oklahoma City and Okmulgee, Okla.

In North America, The Coca-Cola company began working with its bottling partners a decade ago on plans to develop a model that evolves the system to serve the changing customer and consumer landscape, with a focus on creating stronger system alignment.

A critical step was the company's acquisition of the North American territories of Coca-Cola Enterprises in 2010.

Since that deal closed, The Coca-Cola company has accelerated the implementation of the new model by strategically addressing the bottling system, customer service, product supply and a common information technology platform.

Ultimately, the Coca-Cola system in North America will be comprised of economically aligned bottling partners that have the capability to serve major customers, coupled with the ability to maintain strong, local ties across diverse markets in the United States and Canada.

So far, the company has reached definitive agreements or signed letters of intent to refranchise territories that account for approximately 60% of bottler-delivered distribution volume and 41 of the 51 cold-fill production facilities in the United States. The company expects to complete its North American refranchising initiative by the end of 2017.

Country: USA

Sector: Food/Beverages/Tobacco

Target: AC Beverages

Buyer: Arca Continental SAB

Vendor: The Coca-Cola Co

Deal size in USD:

Type: JV

Financing: Cash

Status: Agreed

Buyer advisor: , ,

Comment: KO to hold 20% stake in new company
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Publication:M & A Navigator
Geographic Code:1U7OK
Date:May 27, 2016
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