Coca-Cola's Acquisition

Coca-Cola’s Acquisition

The Coca-Cola’s company chooses to acquire Coca-Cola Enterprises Inc (“CCE) to make CCE one of the largest bottler companies of the North American Operations. According to Coca-Cola’s company CEO, Muhtar Kent, the company is more focus on acquiring the North American operations and remaining key bottling partners with world-class management, financial and operational capabilities. Coca-Cola’s company is targeting to be “well positioned to best serve the unique needs of their flagship market and accelerate sustainable growth for the Coca-Cola system (Press Release, 2010).” With the new North American structure, it will generate marketable combination of businesses, which will serve as our “passport to winning in the world’s largest non-alcoholic ready-to drink profit pool (Just-Drink.com, 2010).”

The acquisition of CCE will bring Coke $9 billion in additional debt, relative to its own $11 billion, although CCE’s asset base is just 35% of Coke’s (Value Expectation, 2010). Assuming a long term top line growth rate of 2% a year and 80 bps of EBITDA margin expansion in the next 5 years, CCE is worth about $18 a share (Value Expectation, 2010). From a wealth creation perspective, CCE has consistently generated returns above its cost of capital or maintained positive Economic Margins for the past decade, although in a declining mode (Value Expectation, 2010). Also, the CCE acquisition will allow Coke to negotiate with retailers directly.

http://www.thecoca-colacompany.com/investors/pdfs/form_10K_2010.pdf. Retrieved on March 19, 2011.

http://www.valueexpectations.com/blogs/our-take-coke%E2%80%99s-nyseko-acquisition-cce%E2%80%99s-nysecce-north-america-bottling-business03032010. Retrieved on March 19, 2011.

http://www.just-drinks.com/news/coca-cola-co-confirms-cce-acquisition_id99959.aspx. Retrieved on March 19, 2011.

http://www.thecoca-colacompany.com/presscenter/nr_20100927_kose.html. Retrieved on...