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Coke's Bottler Takeover Will Strengthen Business: Kent

CNBC.com
Thursday, 25 Feb 2010 | 10:32 AM ET

Coca-Cola CEO Muhtar Kent argued the company's decision to purchase their main North American bottler Coca-Cola Enterprisesis not a reversal of the company's strategy, but rather will allow both companies to strengthen their partnership and business in the North American and European markets.

Coca-Cola bottles
AP
Coca-Cola bottles

"It is not a reversal at all, it is actually fully in-line, we have said all along that CCE continues to be a very important, key partner for us in one of the most key markets, which is Europe and that's why this makes so much sense for us," said Kent, in an interview on CNBC.

The deal also will allow Coca-Cola to capture long-term efficiencies in the North American market and will let the company convert passive capital into active capital, said Kent.

Coca-Cola will give up its 34 percent stake in Coca-Cola Enterprises worth $3.4 billion, and acquire $8.88 billion of CCE debt.

Coca-Cola Enterprises will give shareholders a $10 per share cash distribution to all shareowners and they they will own one-share per-share in the new CCE, said John Brock, the Coca-Cola's Enterprises' CEO.

Kent said the deal will benefit both customers and investors.

Coca-Cola CEO on Bottler Deal
Coca-Cola is buying the North American operations of its largest bottler, Coca-Cola Enterprises. Muhtar Kent, CEO of Coca-Cola, and John Brock, CEO of Coca-Cola Enterprises, discuss the deal with CNBC.

"Evolving our franchise structure will better serve our consumers, better serve our customers and that's why this deal right now makes so much sense," said Kent. "It will add value to all our shareholders, all our stakeholders, and as I said it will allow us to reap those long term efficiencies, synergies so that we can have more fuel for our brands."

In a separate transaction, Coca-Cola will also sell its bottling operations in Norway and Sweden to CCE for $822 million. The bottler will have the right to purchase Coca-Cola's 83 percent equity stake in its German bottling operations for 18 to 36 months after the close for fair value, according to Coca-Cola's Web site.

"It will give us the best footprint of production, distribution and sales of the most preferred beverage brands in the largest profit pool in the world of non-alcoholic beverages," said Kent. "And last, but not least, it will strengthen strategically our European footprint, another critical market for Coca-Cola."

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