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Coca-Cola Company Acquires Aujan

Zacks Equity Research

The Coca-Cola Company (KO) recently completed its acquisition of the beverage segment of Aujan Industries. The acquisition was first announced in December 2011.

According to the terms of the contract, The Coca Cola Company will own the 50% of the Aujan segment that operates 49% of its bottling and distribution business and owns the Aujan owned brands, thus allowing the company to expand its business in the Middle East. The Middle East appears to be a very promising market, as the company achieved double-digit volume growth from the Middle East business in the second quarter of 2012. The acquisition is also expected to help The Coca-Cola Company expand its portfolio in the juice segment.

The company is still largely dependent on its carbonated beverages. However, with increasing consumer health awareness, Coca-Cola is slowly expanding the portfolio of non-carbonated drinks. Coca-Cola commands a leading position in the juices or still beverages category, with its flagship brands Minute Maid, Simply and POWERade.

On the other hand, as one of the leading beverage companies in the Middle East, Aujan Industries will benefit from the global exposure and expertise of The Coca-Cola Company and will be able to build its leading brands and business.

We are encouraged by the company’s global reach, strong brand power, expanding presence outside the U.S. and its solid cash position. Moreover, the company’s strategy of growing through acquisitions and its productivity initiatives are expected to result in significant cost savings and improved productivity in the near future. However, soft economic conditions and a tough currency environment ahead concern us.

Currently, we have a Neutral recommendation on The Coca-Cola Company over the long term. The Coca-Cola Company carries a Zacks #3 Rank in the near term (Hold rating).

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