SYDNEY/BENGALURU - The Coca-Cola Co's KO.N European bottler has made a A$9.28 billion ($6.6 billion) buyout approach for Australian peer Coca-Cola Amatil Ltd CCL.AX, a cut-price proposal that the target firm has backed due to uncertainty related to the coronavirus.
The deal would be the biggest takeover involving Australia this year but prices the target company below its market valuation in February, before fears of a COVID-19 pandemic began to rock global markets and plunged the world into recession.
The support from the Australians indicates expectations of an economic recovery that could take years, a bleaker view than that of some local economists who have pointed to improving economic indicators. Coca-Cola Amatil’s profit has been hit by shutdowns of restaurants and pubs since March.
The country’s second most-populous state, Victoria, is only now starting to allow dine-in food retailers to open after a new wave of infections prompted a second shutdown.
“We are really confident about the recovery that the business is making (but) clearly there’s uncertainty over the next couple of years with the economic situation, and just the risk of further health outbreaks that could disrupt the business,” said Coca-Cola Amatil Chief Executive Alison Watkins on an investor call on Monday when asked about the price.
Shares of Coca-Cola Amatil rose as much as 15% to A$12.31 in morning trading, below the proposed offer price of A$12.75, indicating investors are factoring in the possibility a deal might not eventuate.
On Feb. 20, the company's shares closed at A$13.07 but a month later they were trading below A$8 amid widespread market gyrations as Australian lockdowns took hold. The stock has been steadily rising along with the broader market .AXJO as the country relaxes restrictions and new case numbers decline.
A spokesman for The Coca-Cola Co, which owns 31% of the Australian company and 19% of London-listed Coca-Cola European Partners PLC CCEPC.L (CCEP), said in an email the deal would be "in the best interests of the shareowners of both companies and of the Coca-Cola system overall".
The Australian company said CCEP would conduct due diligence before making a binding offer. The deal would also need approval from Australia’s Foreign Investment Review Board, which was granted increased powers this year to block overseas deals deemed to be a security or supply chain risk.
CCEP in a statement said the deal would almost double its consumer reach, “ultimately driving sustainable and faster growth, through geographic diversification and scale.”