Delta’s choices over potential Coca-Cola exit

If handled and executed well, the transaction can have minimal effects on Delta’s shareholders. Nevertheless, what tempers with their enthusiasm is the fact that like any other transaction there can be complications.

Management will shed more light at the half-year 2017 results Analysts’ Briefing, although it may be early days for any meaningful clarity. Delta is set to release its half year financial results on Thursday, 10 November.

Delta’s share price has declined by 13 percent from 84 cents last week to 73 cents on Thursday as the market responds to the news of a potential reduction in profitability.

The Coca-Cola company will negotiate terms of the deal with AB InBev in the coming months and continue talks with potential partners to refranchise CCBA, which will then be followed by a regulatory approval process.

ABI owns 57 percent of CCBA, Gutsche Family Investments 31.7 percent and TCCC 11.3 percent.

The bottler started production on July 4 this year.

CCBA accounts for about 40 percent of Coca-Cola’s African soft drink sales with revenues of approximately $3 billion. According to their agreement, TCCC retained its change of control clauses that would allow it to repurchase the bottling and distribution assets of SABMiller or sell it to another company.

TCCC states that although it respects ABI’s competences, it has a number of existing partners who are highly qualified and interested in the bottling territories. This serves as a defensive strategy by TCCC since it can be seen as a potential target for acquisition.

Coca-Cola has been moving away from outright ownership of bottling assets, which are more capital intensive and lower-margin than selling syrup and marketing. This implies that there could be an opportunity for other bottlers to acquire the CCBA stake.

Analysts are of the view that, this is an indication that TCCC is not exiting Southern Africa where it has held a near monopoly. Furthermore, unwinding the African bottling operations could cause major disruptions in a fast growing market.

Zimbabwe alone is a $200 million beverage market, analysts noted.- The Source

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