News Release
THE COCA-COLA COMPANY AND COCA-COLA ENTERPRISES STRATEGICALLY ADVANCE AND STRENGTHEN THEIR PARTNERSHIP
The Coca-Cola Company to Acquire CCE's North American Bottling
Business
CCE Has Agreed in Principle to Buy The Coca-Cola Company's Bottling
Operations in Norway and Sweden, and to Obtain the Right to Acquire the
German Bottler
- Advancement fully aligns with the Coca-Cola system's 2020 Vision
and drives long-term value for all shareowners
- Evolves The Coca-Cola Company's North American business to more
profitably deliver the world's greatest brands in the largest NARTD
profit pool in the world
- CCE shareowners will benefit from the improved financial growth
profile and expansion of the Western European business
- The Coca-Cola Company will generate immediate efficiencies with
expected operational synergies of $350 million over four years, and
the transactions, which are substantially cashless, are expected to be
accretive to EPS on a fully diluted basis by 2012
- CCE shareowners to exchange each CCE share for a share in a new
CCE, focused solely on Europe, and $10 per share in cash at closing
The Coca-Cola Company (NYSE: KO) and Coca-Cola Enterprises Inc. (NYSE:
CCE) announce that they have entered into agreements that will
strategically advance the Coca-Cola system in North America and drive
long-term value for all shareholders. In addition, the parties have an
agreement in principle to expand CCE's European business.
"Our 2020 Vision calls for decisive and timely action to continuously
improve and evolve our global franchise system to best serve our
customers and consumers everywhere. Consistent with the 2020 Vision, our
roadmap for winning together, we act today as an aligned system," said
The Coca-Cola Company's Chairman and Chief Executive Officer Muhtar
Kent. "We are not acquiring CCE, rather we are acquiring their North
American operations, and they remain one of our key bottling partners
with world-class management, financial and operational capabilities. We
have a strong and unrelenting belief in our unique and thriving global
bottling system. Our new North American structure will create an
unparalleled combination of businesses, which will serve as our passport
to winning in the world's largest nonalcoholic ready-to-drink profit
pool. This transaction offers compelling value to both The Coca-Cola
Company and CCE shareowners and will create substantial and sustainable
benefits for both companies' stakeholders."
Mr. Kent continued, "Our North American business structure has remained
essentially the same since CCE was founded in 1986, while the market and
industry have changed dramatically. With this transaction, we are
converting passive capital into active capital, giving us direct control
over our investment in North America to accelerate growth and drive
long-term profitability. We will work closely with our bottling partners
to create an evolved franchise system for the unique needs of the North
American market. Additionally, we will reconfigure our manufacturing,
supply chain and logistics operations to achieve cost reductions over
time. Importantly, the creation of a unified operating system will
strategically position us to better market and distribute North
America's most preferred nonalcoholic beverage brands. At the same time,
in Europe, we are further strengthening our franchise system to provide
broader, contiguous geographic coverage and optimizing our marketing and
distribution leadership."
CCE's Chairman and Chief Executive Officer John Brock said, "This
transformation creates significant near-term shareowner value through
the sale of the North American business for fair value, delivering over
$4 billion in cash to CCE shareowners, through cash distributions and
planned share repurchases. At the same time, this enables our
shareowners to retain equity in a sales and distribution company with an
improved growth profile. In the future, CCE shareowners will also
benefit from the expansion of our European business and our improved
financial flexibility."
Mr. Brock added, "CCE remains the preeminent Western European bottler
and a key strategic partner with The Coca-Cola Company. Our European
business serves an attractive market with growing volumes and profit
driven by rising per capita consumption. As such, CCE will have an
improved profile with enhanced revenue, margins and EPS growth
prospects. Together with The Coca-Cola Company, we will continue to
improve the effectiveness of our operations in our expanded presence in
Europe. These actions strengthen our ability to compete effectively and
sustainably in Europe and represent the beginning of an exciting new era
of long-term growth for CCE's business and shareowners."
Mr. Kent concluded, "This is a truly historic day for the Coca-Cola
system. As the world's leading beverage Company, we are very excited
about the vast opportunities before us and I can say with confidence
there is no better business to be in. Over the next several years, the
nearly $650 billion dollar global nonalcoholic ready-to-drink beverage
industry is expected to grow faster than worldwide GDP and we are best
positioned to capitalize on this enormous industry opportunity in North
America and Europe. These joint actions further reinforce our confidence
in achieving our 2020 Vision to more than double system revenue and
double servings to over 3 billion per day. With our system more aligned
than ever, the timing is right, and we believe that these actions will
usher in a new era of winning for our Coca-Cola system."
Details of the Transactions
The Coca-Cola Company, in a substantially cashless transaction, will
acquire CCE's entire North American business, which consists of
approximately 75 percent of U.S. bottler-delivered volume and almost 100
percent of Canadian bottler-delivered volume. At the close of the
transaction, The Coca-Cola Company will have direct control over
approximately 90 percent of the total North America volume, including
its current direct businesses. The Coca-Cola Company's acquisition of
the assets and liabilities of CCE's North American business includes
consideration of The Coca-Cola Company's current 34 percent equity
ownership in CCE, valued at $3.4 billion, based upon a thirty day
trailing average as of February 24, 2010. In addition, consideration
includes the assumption of $8.88 billion of CCE debt and all of the
North American assets and liabilities – including CCE's accumulated
benefit obligation for North America of $580 million as of December 31,
2009, and certain other one-time costs and benefits.
In a concurrent agreement, The Coca-Cola Company and CCE have agreed in
principle that CCE will buy The Coca-Cola Company's bottling operations
in Norway and Sweden for $822 million, subject to the signing of
definitive agreements, and that CCE will have the right to acquire The
Coca-Cola Company's 83 percent equity stake in its German bottling
operations 18 to 36 months after closing for fair value.
A new entity, which will retain the name Coca-Cola Enterprises Inc.,
will be created through a split-off that will hold CCE's European
businesses. CCE's public shareowners will exchange each existing CCE
share for a share in the new entity and will hold 100 percent of this
new entity.
CCE will provide its shareowners, excluding The Coca-Cola Company, with
a special one-time cash payment of $10 per share. In connection with the
transactions, CCE expects to raise initial debt financing of up to 3.0x
EBITDA to pay shareowners $10 per share in cash at closing, to acquire
the Norway and Sweden bottlers and to fund the expected share repurchase
program. Following completion of the transaction, it is expected that
CCE will adopt a program to repurchase up to approximately $1 billion of
shares and a policy of paying an expected annual dividend of $0.50 per
share subject to the discretion of CCE's Board of Directors and its
consideration of various factors.
The Coca-Cola Company and CCE expect the transactions to close in the
fourth quarter of 2010.
About CCR-USA and CCRC
At the close, The Coca-Cola Company will rename the sales and
operational elements of the North American businesses Coca-Cola
Refreshments USA, Inc. ("CCR-USA") and Coca-Cola Refreshments Canada,
Ltd. ("CCRC"), which will be wholly-owned subsidiaries of The Coca-Cola
Company. Following the close, The Coca-Cola Company will combine the
Foodservice business, The Minute Maid Company, the Supply Chain
organization, including finished product operations, and our
company-owned bottling operations in Philadelphia with CCE's North
American business to form CCR-USA and CCRC. In the U.S., CCR-USA will be
organized as a unified operating entity with distinct capabilities to
include supply chain and logistics, sales and customer service
operations. In Canada, CCRC will be a single dedicated production,
marketing, sales and distribution organization. The Coca-Cola Company's
remaining North American operation will continue to be responsible for
brand marketing and franchise support. Details regarding the structure,
leadership and integration plans will be forthcoming.
Once completed, the transactions are expected to generate operational
synergies of approximately $350 million over four years for The
Coca-Cola Company and are expected to be accretive to EPS on a fully
diluted basis by 2012. Further, in North America, this will generate
system synergies that will increase the growth rate and cash flow on a
pro forma basis over time. Pro forma for this acquisition, the North
American business, including CCR-USA and CCRC, would have generated
approximately $19.2 billion in revenues and $3.6 billion of EBITDA in
2009.
The Coca-Cola Company 2010 Outlook
As a result of these agreements, The Coca-Cola Company has not made any
share repurchases during the current fiscal year and will continue to be
out of the market until the close of these transactions. However, the
Company remains committed to repurchasing $1.5 billion in 2010.
About new CCE
CCE will be The Coca-Cola Company's strategic bottling partner in
Western Europe and the third-largest independent bottler globally.
Reflecting CCE's position as The Coca-Cola Company's strategic bottling
partner in Western Europe, the companies will enter into a 10+10 year
bottling agreement and a 5-year incidence pricing agreement. Pro forma,
including the contributions of Norway and Sweden, CCE would have
generated approximately $7.3 billion in revenues, $850 million in
operating income, and $1.2 billion of EBITDA in 2009.
At closing, before planned share repurchases, CCE expects to have net
debt of approximately $2 billion. Immediately after closing and before
share repurchase, CCE is expected to have approximately 350-360 million
outstanding shares on a fully diluted basis, substantially comparable to
the publicly owned shares of CCE today.
Shortly after closing, the Board of CCE is expected to announce a
planned share repurchase program of approximately $1 billion and an
initial annual dividend of $0.50 per share. Payment of cash dividends
and stock repurchases by CCE will be at the discretion of CCE's Board of
Directors in accordance with applicable law after taking into account
various factors, including, but not limited to, CCE's financial
condition, operating results, current and anticipated cash needs and
plans for growth. Therefore, no assurance can be given that CCE will pay
any dividends to its shareowners or make share repurchases, and no
assurance can be given to the amount of any such dividends or share
repurchases if CCE's Board of Directors determines to do so.
CCE will retain the Coca-Cola Enterprises Inc. corporate name and remain
headquartered in Atlanta. CCE will continue to be traded on the NYSE
under the CCE ticker. John Brock, Chairman and Chief Executive Officer,
Bill Douglas, Chief Financial Officer, Hubert Patricot, President of the
European Group, and other members of the CCE corporate management team
will continue to lead the company. In addition, the current independent
directors will continue to comprise the CCE Board.
CCE 2010 Outlook
As a result of these agreements, CCE has not made any share repurchases
during the current fiscal year, and it does not plan to do so before the
transactions close. CCE intends to provide additional details on FY 2010
outlook during its upcoming first quarter call.
Additional Information
CCE's independent Affiliated Transaction Committee recommended that
CCE's Board approve the transactions. The Boards of Directors of both
The Coca-Cola Company and CCE have approved the transactions, which are
subject to approval by CCE's public shareowners and customary regulatory
approvals.
Allen & Company and Goldman Sachs & Co. acted as financial advisors to
The Coca-Cola Company. Skadden, Arps, Slate, Meagher & Flom LLP acted as
legal counsel. Cleary Gottlieb Steen & Hamilton LLP and Wilson Sonsini
Goodrich & Rosati provided antitrust counsel.
Credit Suisse and Lazard acted as financial advisors to CCE and Cahill
Gordon & Reindel LLP acted as legal counsel. Greenhill & Co. acted as
financial advisor to the Affiliated Transaction Committee and McKenna
Long & Aldridge LLP provided legal counsel.
For more information about the transactions, please access our
transaction specific website at: www.KOsystemevolution.com.
Conference Call/Webcast
The Coca-Cola Company and Coca-Cola Enterprises are hosting a joint
conference call with investors and analysts to discuss our transactions
today at 9:30 a.m. (EST). We invite investors to listen to the live
audiocast of the conference call at either website, www.thecoca-colacompany.com
or at www.cokecce.com in the
"Investors" section. Further, the "Investors" section of each website
includes a reconciliation of non-GAAP financial measures that may be
used periodically by management when discussing their financial results
with investors and analysts to our results as reported under GAAP.
About The Coca-Cola Company
The Coca-Cola Company (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands. Together with Coca-Cola®, recognized as the world’s most valuable brand, the Company’s portfolio includes 14 billion dollar brands, including Diet Coke®, Fanta®, Sprite®, Coca-Cola Zero®, vitaminwater, Powerade®, Minute Maid®, Simply® and Georgia® Coffee. Globally, we are the No. 1 provider of sparkling beverages, juices and juice drinks and ready-to-drink teas and coffees. Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy the Company’s beverages at a rate of 1.6 billion servings a day. With an enduring commitment to building sustainable communities, our Company is focused on initiatives that protect the environment, conserve resources and enhance the economic development of the communities where we operate. For more information about our Company, please visit our web site at www.thecoca-colacompany.com.
The Coca-Cola Company Forward-Looking
Statements
This press release may contain statements, estimates or projections
that constitute "forward-looking statements" as defined under U.S.
federal securities laws. Generally, the words "believe," "expect,"
"intend," "estimate," "anticipate," "project," "will" and similar
expressions identify forward-looking statements, which generally are not
historical in nature. Forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ
materially from The Coca-Cola Company's historical experience and our
present expectations or projections. These risks include, but are not
limited to, obesity and other health concerns; scarcity and quality of
water; changes in the nonalcoholic beverages business environment,
including changes in consumer preferences based on health and nutrition
considerations and obesity concerns; shifting consumer tastes and needs,
changes in lifestyles and competitive product and pricing pressures;
impact of the global credit crisis on our liquidity and financial
performance; our ability to expand our operations in developing and
emerging markets; foreign currency exchange rate fluctuations; increases
in interest rates; our ability to maintain good relationships with our
bottling partners; the financial condition of our bottling partners; our
ability and the ability of our bottling partners to maintain good labor
relations, including the ability to renew collective bargaining
agreements on satisfactory terms and avoid strikes, work stoppages or
labor unrest; increase in the cost, disruption of supply or shortage of
energy; increase in cost, disruption of supply or shortage of
ingredients or packaging materials; changes in laws and regulations
relating to beverage containers and packaging, including container
deposit, recycling, eco-tax and/or product stewardship laws or
regulations; adoption of significant additional labeling or warning
requirements; unfavorable general economic conditions in the United
States or other major markets; unfavorable economic and political
conditions in international markets, including civil unrest and product
boycotts; changes in commercial or market practices and business model
within the European Union; litigation uncertainties; adverse weather
conditions; our ability to maintain brand image and corporate reputation
as well as other product issues such as product recalls; changes in
legal and regulatory environments; changes in accounting standards and
taxation requirements; our ability to achieve overall long-term goals;
our ability to protect our information systems; additional impairment
charges; our ability to successfully manage Company-owned bottling
operations; the impact of climate change on our business; global or
regional catastrophic events; and other risks discussed in our Company's
filings with the Securities and Exchange Commission (SEC), including our
Annual Report on Form 10-K, which filings are available from the SEC.
You should not place undue reliance on forward-looking statements, which
speak only as of the date they are made. The Coca-Cola Company
undertakes no obligation to publicly update or revise any
forward-looking statements.
About Coca-Cola Enterprises Inc.
Coca-Cola Enterprises Inc. is the world's largest marketer, distributor,
and producer of bottle and can liquid nonalcoholic refreshment. CCE
sells approximately 80 percent of The Coca-Cola Company's bottle and can
volume in North America and is the sole licensed bottler for products of
The Coca-Cola Company in Belgium, continental France, Great Britain,
Luxembourg, Monaco, and the Netherlands. For more information about our
Company, please visit our website at www.cokecce.com.
Coca-Cola Enterprises Inc.
Forward-Looking Statements
Included in this news release are forward-looking management comments
and other statements that reflect management's current outlook for
future periods. As always, these expectations are based on currently
available competitive, financial, and economic data along with our
current operating plans and are subject to risks and uncertainties that
could cause actual results to differ materially from the results
contemplated by the forward-looking statements. The forward-looking
statements in this news release should be read in conjunction with the
risks and uncertainties discussed in our filings with the Securities and
Exchange Commission, including our most recent annual report on Form
10-K and subsequent SEC filings.
Important Additional Information and
Where to Find It
This communication may be deemed to be solicitation material in
respect of the proposed transaction. In connection with the proposed
transaction and required shareowner approval, Coca-Cola Enterprises Inc.
("Company") will file relevant materials with the Securities and
Exchange Commission (the "SEC"), including a proxy statement/prospectus
contained in a Form S-4 registration statement, which will be mailed to
the shareowners of the Company.
SHAREOWNERS OF THE COMPANY ARE URGED TO READ ALL RELEVANT DOCUMENTS
FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT/PROSPECTUS WHEN IT
BECOMES AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE PROPOSED TRANSACTION.
Shareowners may obtain a free copy of the proxy statement/prospectus,
when it becomes available, and other documents filed by the Company at
the SEC's web site at www.sec.gov. Copies of the documents filed
with the SEC by the Company will be available free of charge on the
Company's internet website at www.cokecce.com under the tab "Investor
Relations" or by contacting the Investor Relations Department of
Coca-Cola Enterprises at 770-989-3246.
Participants in the Solicitation
Coca-Cola Enterprises ("Company") and its directors, executive
officers and certain other members of its management and employees may
be deemed to be participants in the solicitation of proxies from its
shareowners in connection with the proposed transaction. Information
regarding the interests of such directors and executive officers was
included in the Company's Proxy Statement for its 2009 Annual Meeting of
Shareowners filed with the SEC March 3, 2009 and a Form 8-K filed on
December 18, 2009 and information concerning the participants in the
solicitation will be included in the proxy statement/prospectus relating
to the proposed transaction when it becomes available. Each of
these documents is, or will be, available free of charge at the SEC's
website at www.sec.gov and from the Company on its website or by
contacting the Shareowner Relations Department at the telephone number
above.
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