Capital raising looms for Coca-Cola purchase

Coca-Cola Amatil could announce as early as Monday a sizeable capital raising.

Coca-Cola Amatil could announce as early as Monday a sizeable capital raising to fund the acquisition of either beer and cider brands owned by Asahi or the dairy drinks business owned by Lion.

Coca-Cola Amatil could announce as early as Monday a sizeable capital raising to fund the acquisition of either beer and cider brands owned by Asahi or the dairy drinks business owned by Lion, according to analysts, as the bottler seeks to diversify away from fizzy drinks.

Shares in Coca-Cola Amatil were placed in a trading halt on Friday pending a “potential material transaction” to be announced to the market before Tuesday, with speculation immediately turning to two deals currently swirling through investment circles.

The first is a number of key beer and cider brands tipped out of last year’s $16bn acquisition of Carlton & United Breweries (CUB) by Japanese giant Asahi which could include brands Stella, Strongbow, Becks, and smaller cider brands Bonamy’s and Little Green to please the competition regulator.

Also up for sale is Lion Dairy & Drinks business, which owns leading brands like Big M, Dare, Pura, Dairy Farmers and Vitasoy. The Lion drinks arm was to be sold for $600m last year to China Mengniu but the deal was rejected by the federal government and the assets are now back on the auction block, with Coca-Cola Amatil and Bega Cheese seen as frontrunners.

Coca-Cola Amatil has in the past diversified itself away from sugary soft drinks with brands and distribution deals in coffee, bottled water, juice, dark spirits, whiskey and a small portfolio of beer brands including Blue Moon, Coors and Miller.

Citi analyst Craig Woolford said Coca-Cola Amatil had $400m to 600m in debt capacity and that if both assets were purchased, the total outlay could be $600m to $1.2bn, requiring an equity raising.

“Given both equity and debt funding costs are low, an acquisition is likely to be earnings per share accretive by around 4 per cent to 6 per cent,” he said.

Citi estimates revenue of $150m-$170m from Asahi beer and cider assets and pre-tax earnings of $40m to $65m. “Synergies could be strong given Coca-Cola is the third largest liquor company in Australia,” it said.