Coca-Cola Amatil could face $10bn takeover by Britain’s Coca-Cola European Partners

It would be the biggest takeover of an Australian company this year and trigger a huge shake-up in the beverage sector.

Coca-Cola Amatil CEO Alison Watkins at their offices in North Sydney. Picture: Adam Yip

Coca-Cola Amatil and its popular portfolio of consumer brands could soon be in the hands of London-listed Coca-Cola European Partners, which is considering a $10bn takeover bid for the Australian bottler.

Management, bankers and advisers in Australia and Europe were locked in negotiations over the weekend as Europe’s biggest Coca-Cola bottler and Australia’s biggest non-alcoholic beverage group tussled over a possible bid that could emerge as early as this morning.

The parent company, The Coca-Cola Company, is a major shareholder in both the suitor and the target as well as being the owner of their core beverage brands. Its decision will make or break the deal, which could create the world’s biggest Coca-Cola bottler, with operations from Germany to Fiji.

CC Amatil’s shares were placed in a trading halt on Friday pending what it said was a “potential material transaction”. The shares last traded at $10.75, giving the company a market capitalisation of $7.8bn.

CC Amatil is the local distributor of soft drink brands such as Fanta, Sprite and Lift, as well operating as a portfolio of beverages including Mt Franklin water, Goulburn Valley juices, coffee, dairy and beer.

To clinch the deal, investors will probably need a $10bn bid.

Many see the fingerprints of The Coca-Cola Company all over the potential deal. The Atlanta-based US giant is the biggest shareholder in CC Amatil with a 30.4 per cent stake and two seats on its board. It has a 19.3 per cent stake in the UK-based Coca-Cola European Partners and two representatives on its board.

The Coca-Cola Company also has a 29.4 per cent stake in CC Amatil’s Indonesian bottling business, which it bought in 2014, in return for investing $US500m ($700m) in the Amatil business. It was meant to be the Australian company’s growth engine but has struggled to perform in the face of a lacklustre Indonesian economy.

The US parent will be the kingmaker if the acquisition is to proceed, and will emerge with its stakes in the European and Australasian bottler combined under a single corporate entity.

It would cement Coca-Cola European Partners’ position as the world’s biggest bottler of Coca-Cola by revenue. The company reported sales of €12bn ($20bn) in calendar 2019 and operates 47 manufacturing sites across Europe.

Coca-Cola Amatil’s popular supermarket brands include Coca Cola, Sprite, Fanta, Lift, Cascade. Picture: AAP

Over the weekend Bloomberg reported that Coca-Cola European Partners was in talks to buy the local operation. A spokesman for CC Amatil declined to comment.

Bloomberg reported that negotiations were advanced and details could be announced within days. It said details of the structure of the deal were still being finalised and the talks could fail.

The Australian has confirmed an approach was made to the Australian company, with investment bank UBS appointed to a defence role for CC Amatil.

At an expected price tag of $10bn it would mark the biggest takeover of an Australian company this year. It compares to last year’s $16bn takeover of Carlton & United Breweries and Nippon Paint’s $3.8bn acquisition of Dulux, and Japan Post’s $6.5bn takeover of Toll five years ago.

The acquisition would trigger a shake-up of the nation’s beverage sector that would touch all segments of the drinks industry.

It would make CC Amatil a more powerful supplier to contend with for supermarket chains such as Woolworths and Coles, as well as convenience stores and other venues that stock its portfolio of brands.

It is likely a deal would need approval from the Foreign Investment Review Board.

Coca-Cola European Partners has an existing connection to Australia through a director and its placement within the wider Coca-Cola family.

Christine Cross, a former director of logistics Brambles and a former director of Australian-New Zealand adventure wear retailer Kathmandu, is a non-executive director of Coca-Cola European Partners.

Coca-Cola European Partners also has access to a former insider at its target, with another of its directors, Irial Finan, a director of CC Amatil a decade ago.

He also sat on the Australian bottler’s board as a representative of The Coca Cola Company.

CC Amatil owns the bottling rights for the Coca-Cola brand and other beverages in New Zealand and Papua New Guinea.

It has a majority stake in the Indonesian business as well as beverage assets in Fiji. The chief executive of CC Amatil isAlison Watkins, a former director of Woolworths and a Richmond Football Club supporter who was celebrating the team’s AFLgrand final win over the weekend while dipping in and out of boardroom meetings.

CC Amatil is chaired by ANZ director Ilana Atlas.

Coca-Cola European Partners was created from the three-way merger of Coca-Cola Enterprises, Coca-Cola Iberian Partners andGermany’s Coca-Cola in 2015. The biggest shareholder is Cobega, an investment vehicle belonging to Spain’s Daurella family. The family has a history of bottling Coca-Cola that goes back to the 1950s.

The potential $10bn takeover comes as the bottler was rumoured to be interested in buying a selection of beer and cider assetsfrom Japan’s Asahi, following its $16bn takeover of Carlton & United Breweries and the Lion Dairy & Drinks business from brewer Lion.

The US parent may have prodded its European bottler to make a move on CC Amatil to head off the possible acquisition of theAsahi or dairy assets. It is long believed Atlanta took a dim view of CC Amatil spreading into other beverages and losingfocus on its core Coca Cola brands.