Low-ball Coca-Cola Amatil takeover bid leaves analysts feeling a little flat

With some investors wincing at the offer price it seems the general market consensus is the deal is a cheap one. Picture: AFP

A low-ball offer at a time when trading for Coca-Cola Amatil in its key Australian and New Zealand markets is starting to emerge from its COVID-19 slump: that’s how analysts have viewed the opportunistic $9.3bn takeover grab for the bottler by Coca-Cola European Partners.

With some investors also wincing at the offer price of $12.75 per share, which is just below the $13 earlier this year before the COVID-19 pandemic smashed economies, it seems the general market consensus is the deal is a cheap one.

However, with the takeover conducted with the full blessing and partial financial support of CC Amatil’s biggest shareholder, The Coca-Cola Company, the takeover is almost certain to proceed. The Coca-Cola Company is also a major shareholder in the European bottler, owning 19 per cent of it, matched by a 30 per cent stake in CC Amatil, and it will accept a lower cash offer — around $9.57 — for one third of its stake in CC Amatil to help get the deal over the line.

JPMorgan analyst Shaun Cousins says $12.75 is a low price given a strong trading update provided on Monday and the bottler’s higher cost-savings and outlook.

“We note Coca-Cola European Partners is forecast to enjoy mid-teens earnings per share accretion from the CC Amatil acquisition,” he says.

Morgans analyst Belinda Moore says the timing of the takeover offer is “somewhat opportunistic” given CC Amatil’s earnings and share price have been impacted by COVID-19.

“This is a reasonable offer for shareholders but it isn’t a knockout offer.

“With volumes recovering as COVID-19 restrictions ease and $145m of cost savings targeted by fiscal 2022, we think the business is well placed in the future.”

Morgan Stanley analyst Niraj Shah also seemed underwhelmed by the offer, simply labelling the $12.75 price a “decent proposal”.

“Given fiscal 2020 COVID-19 headwinds, directional improvement in volume/mix, and the cost-out, the bid is arguably opportunistic,’’ Mr Shah said.

“However, the medium-term outlook remains characterised by uncertainty.”