Lion Nathan makes $7.6 billion bid for Coca-Cola Amatil

Posted by Daniel Palmer on 17th November 2008

Australia’s largest soft drink bottler, Coca-Cola Amatil, has today informed shareholders that brewer Lion Nathan has made a A$7.61b takeover offer for CCA.

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The news comes following rumours circulating of a pending merger between Lion Nathan and Coca-Cola Amatil (CCA).

Lion Nathan, Australia’s second largest brewer, entered a trading halt this morning in the wake of fresh rumours in the Australian Financial Review that merger discussions with Australia’s biggest soft drink bottler had gone to the next level. The paper reported that the two companies initially floated the idea of a merger about six months ago, but have intensified talks in recent weeks.

Lion Nathan, which Japanese Brewer Kirin Holdings has a 46% stake in, includes the Tooheys, Hahn, XXXX, Heineken and Bacardi brands amongst its range for distribution in Australia. While CCA, sells the Coca-Cola, Mother and Powerade brands, as well as operating fruit and vegetable processor SPC Ardmona. Any deal would create an $11 billion beverage leader.

The takeover offer, which represented a 25% premium on the share price of CCA at close on Friday, is not surprising given Kirin’s desire to increase their presence in Australia. In 1998 they acquired their stake in Lion Nathan and last year they purchased dairy producer National Foods for $2.8b. They are currently finalising a $910 million takeover of Australian dairy co-op Dairy Farmers (via their National Foods subsidiary).

Coca-Cola Amatil appears set to reject the non-binding offer, however. “The CCA Board has reviewed its position and believes that there are a number of material deficiencies in the Proposal, which is subject to a range of material conditions precedent,” the Company advised in a statement. “In particular, the pricing multiple proposed is materially below recent multiples paid for domestic and international beverage companies and the CCA Board can give no assurance that the Proposal will proceed or be supported by the CCA Board or its major supplier, The Coca-Cola Company.”

Coca-Cola Amatil’s shares have soared on the news, climbing almost 16% by 10:45am to $9.56. Lion Nathan remains in a trading halt pending their own announcement.

Both CCA and Lion Nathan have also been linked to a possible offer for Cadbury Schweppes’ beverage arm in Australia, which remains under review by Cadbury, as the Australian and New Zealand beverage industries continue their consolidation.