Coca-Cola Amatil dismissive of Foster’s speculation

Posted by Daniel Palmer on 22nd May 2009

Continued speculation of a multi-billion dollar merger between Australia’s largest alcoholic and non-alcoholic beverage makers has been quashed by Coca-Cola Amatil at their Annual General Meeting today.

Terry Davis, CCA’s Chief Executive, told reporters that they were happy to continue pursuing organic growth via their joint venture with SAB Miller – Pacific Beverages.

“We’re not concerned how long it takes us to get a bigger presence in the Australian beer market – we’re taking this gradually,” he advised. “We’re very much aligned (with SAB Miller) in terms of the objectives of the two parties.”

Mr Davis added that they were not contemplating a major acquisition in the next couple of years nor would their business be up for sale. However, he did say that the Board would be prepared to look at any proposals put forward provided the multiples offered compared to that of similar deals such as the takeovers of Schweppes and Frucor.

Amatil dismissed a takeover offer from brewer Lion Nathan earlier this year despite Davis admitting that the logic for merging soft drink and beer was “very strong”. Their major shareholder, The Coca-Cola Company, was a major driver against the takeover bid, which led to some observers suggesting they may wield too much power over their Australian bottler.

Media reports suggesting tension between Amatil and their largest shareholder were once again refuted by the company today.

“Contrary to what some have suggested, the fact that we cannot compel them to sell or dispose of their shares does not mean that we should have a bad relationship or indeed that it should affect the second part of the relationship (as a supplier),” Chairman David Gonski said. “It is their right to deal with their shares as they wish and as I mentioned previously, this is what they did in relation to the Lion Nathan proposal.”

“As to the second part of the relationship, in my view it is strong and healthy. In the period that I’ve been on the Board, I don’t actually think that I have seen it more healthy,” he remarked. “The excellence of this relationship was borne out in 2008 in our new product development with the launch of Glacéau Vitamin Water and the relaunch of the Mother energy drink. Australia was in fact the first market outside of the United States in which Glacéau Vitamin Water was launched following the acquisition of the brand by The Coca-Cola Company in 2006.”

“This was a significant achievement and demonstrates the very high regard in which CCA is held by The Coca-Cola Company.”

Foster’s, meanwhile, are anticipated to announce some major business changes soon, which might see them demerge their Southcorp wine business to make their beer business more alluring to potential bidders.