Dow Jones Newswires -- May 21, 1998 Coca-Cola Amatil Demerger, Acquisitions Fair - Expert
SYDNEY (Dow Jones)--Coca-Cola Amatil Ltd. (CCLAY), an Australian-based soft drink bottling concern, Thursday said an independent expert has found that a proposal to spin-off its European operations to create a new company is in the best interests of Coca-Cola Amatil shareholders.
The expert, Grant Thornton & Associates, also found the acquisition by Coca-Cola Amatil of Korean bottling operations owned by Coca-Cola Co. (KO) of the U.S. is both fair and reasonable, the Australian company said in a statement.
Grant Thorton reached a similar conclusion for the planned purchase by the new Europe company, Coca-Cola Beverages PLC, of Coca-Cola Co.'s businesses in North-Central Italy.
The moves are part of a restructuring of the Coca-Cola group announced in early February, after which Coca-Cola Amatil will focus exclusively on developing businesses in the Asia-Pacific region.
Under the plan, shares in Coca-Cola Beverages will be distributed on a pro-rata basis to existing shareholders in Coca-Cola Amatil by way of a capital return.
However, Coca-Cola Amatil will provide the means for its shareholders, if they wish, to sell shares in the Europe company, which will be listed on the London Stock Exchange as well as the Australian Stock Exchange.
Institutions will bid for the shares through a so-called book-building process operated by SBC Warburg Dillon Read. Coca-Cola Amatil said the price that its shareholders can expect to receive for their shares in Coca-Cola Beverages is likely to fall between A$3.40 a share and A$4.30 a share.
Based on advice from the U.S. Securities Exchange Commission, U.S. shareholders won't be eligible to sell their shares in Coca-Cola Beverages via the book-building process, the company said.
The Coca-Cola Co. will participate in the book-build share-bid process, buying about 37 million shares to achieve a goal of taking an ultimate 50.1% stake in Coca-Cola Beverages.
It will be helped to this target by Coca-Cola Beverages' purchase of the Coca-Cola Co.'s north and central Italy operations for about US$979 million, to be adjusted for certain elements including US$31 million for additional real-estate assets.
The Europe company will issue 213.3 million shares to Coca-Cola Co. in consideration for the business, with the balance paid in cash.
Alternatively, San Miguel Corp. (SMGBF) of the Philippines intends to sell, via the book build, at least 50 million of a total 212.3 million shares that it will receive in Coca-Cola Beverages.
The Coca-Cola Co. owns about 33% of Coca-Cola Amatil while San Miguel owns 25% of the Australian company.
The Kerry Group hasn't made a decision on whether to hold or dispose of the 46.5 million shares in Coca-Cola Beverages that it will receive.
A spokesman for Coca-Cola Amatil said the company is constrained for the moment in giving earnings forecasts on the new Europe company because of rules that it must follow in offering the shares in the U.K.
However, it said that had Coca-Cola Beverages, encompassing the Italian bottling operations, started operations Jan. 1 last year it would have recorded a trading profit of 73.5 million pounds (GBP) in 1997 on sales of GBP1.20 billion.
In contrast, the Korean operations that Coca-Cola Amatil plans to buy from Coca-Cola Co. for US$460.5 million are forecast to incur a trading loss of A$12.9 million in 1998 on sales of A$576.2 million. Depreciation of the Korean currency will hurt the operations' earnings, while that country's external and domestic economic conditions will remain difficult in 1998, Coca-Cola Amatil said.
Coca-Cola Co., which will receive shares in Coca-Cola Amatil for the Korea business, will emerge with between 41% and 43.3% of the Australian company after the deal is completed.