Three European Coca-Cola bottlers to merge

Thu Aug 6, 2015 2:18pm EDT
 
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By Martinne Geller

LONDON (Reuters) - Three European bottlers of Coca-Cola (KO.N: Quote) drinks have agreed to merge in what will be one of the continent's largest consumer products deals ever, as they hope greater scale and cost cutting will revitalize sluggish soft drink sales.

Coca-Cola Enterprises CCE.N said on Thursday it would combine with Coca-Cola Iberian Partners (CCIP) and the German bottling business of Coca-Cola to create a new company that will be the world's largest independent bottler of Coke drinks by net revenue, with business in 13 countries including Spain, France and Britain.

The transaction will give the new company, Coca-Cola European Partners (CCEP), a value of 28 billion euros ($31 billion) including debt, a source involved in the deal said, adding that was based on the core earnings of the companies, planned synergies and CCE's current valuation.

CCEP will have annual revenue of $12.6 billion and earnings before interest, tax, depreciation and amortization (EBITDA) of $2.1 billion.

"It's a major milestone and major transaction that will benefit all parties involved," said Coke Chief Executive Muhtar Kent on a conference call. "There's no question we all believe that increased investment potential will lead to a better trajectory in terms of increased revenue growth going forward."

CCE, whose drinks include Coke, Fanta and Capri-Sun, is struggling with weak sales in Western Europe, where austerity-hit consumers are drinking less soda, forcing producers to discount them, which hurts revenue and profit.

Combining the bottlers, which buy drink concentrate from Coca-Cola and package and distribute the drinks, will remove duplicate functions and free up cash to be reinvested in marketing and sales.

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Bottles of Coca-Cola are seen at the Safeway store in Wheaton, Maryland February 13, 2015.    REUTERS/Gary Cameron