SABMiller, Coca-Cola Strike Deal With South Africa Over Bottling Merger -- Update
May 04 2016 - 4:06AM
Dow Jones News
By Saabira Chaudhuri
LONDON-- SABMiller PLC and Coca-Cola Co. have struck a deal with
South Africa's government to help push through a long-pending
merger of their bottling operations in parts of Africa.
In November 2014, Coca-Cola struck a deal to combine bottling
assets with SABMiller and privately held Gutsche Family Investments
to create a joint venture spanning 12 African countries and about
40% of Coke's soft-drink volumes on the continent.
SABMiller, which has since agreed to be acquired by
Anheuser-Busch InBev NV, is slated to hold 57% of newly created
Coca-Cola Beverages Africa and Coke will own 11.3%. The remainder
will be owned by Gutsche, a major shareholder in Coke's African
bottling operations.
However, the deal has yet to close as the South African
government has harbored concerns about protecting jobs in the
country.
SABMiller on Wednesday outlined the terms of its deal with the
South African government, saying the new soft-drink bottling
operation--which will be Africa's largest if approved--will keep
employment at current levels for three years after the deal is
approved. Layoffs of senior staff will be limited.
The company also agreed to invest 800 million South African
rands ($54.34 million) to support farmers and help retailers, in
addition to a number of smaller commitments like allowing small
retailers to allot 10% of space in Coca-Cola coolers to the drinks
of smaller competitors if needed.
As part of the 2014 bottling deal, Coke said it would pay $260
million for the world-wide rights to SABMiller's Appletiser, a
carbonated apple juice, and the rights to another 19 nonalcoholic
brands in Africa and Latin America.
Wednesday the companies agreed to sell 20% of shares in
Appletiser South Africa to "appropriate black shareholders who will
be expected to participate actively in the business" and to grow
Appletiser's production in South Africa with an eye on exporting
the product in Africa and beyond.
"I am very happy that we have reached this agreement and hope we
now have a clear path to the conclusion of this transaction and the
creation of Coca-Cola Beverages Africa," said Alan Clark,
SABMiller's Chief Executive, in a statement.
South Africa's competition tribunal needs to approve the
bottling merger for the deal to close. A hearing on the proposed
merger kicks off May 9.
Wednesday's agreements come after last month AB InBev said it
had reached an agreement with the South African government to
create a $69 million investment fund and other commitments designed
to help it secure regulatory approval in the country for its deal
to buy SABMiller. The Belgian brewer's pending acquistion has
created uncertainty around Coke's bottling arrangements in Africa
since ABInBev is PepsiCo Inc.'s bottler in Latin America. Pepsi and
Coke are arch rivals, while--to complicate things further--Coke is
also often cited as being a possible acquisition target for AB
InBev.
--Tapan Panchal contributed to this article
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
May 04, 2016 04:51 ET (08:51 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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