(Bloomberg) – Coca-Cola Co., the world’s biggest soda maker, is in talks to buy the North American operations of bottler Coca-Cola Enterprises Inc. for almost $15 billion including debt, according to two people with knowledge of the discussions.
The sides may reach an agreement within days or the talks may fall apart, said the people, who declined to be identified because the negotiations are private. In the transaction under discussion, Coca-Cola would sell bottling operations in Scandinavia and Germany to Coca-Cola Enterprises, its largest bottler, the people said.
A purchase would follow PepsiCo Inc.’s move to bring its bottling operations in-house as both companies try to reduce expenses and turn around the U.S. market, where soft-drink volume sales have declined since 2005. Coca-Cola Chief Executive Officer Muhtar Kent has introduced new packaging and pricing for Coke in North America to draw customers in addition to cutting supply-chain costs.
“We expect that Coca-Cola Enterprises will not grow revenue significantly,” Sachin Shah, a special situations and merger arbitrage strategist at Capstone Global Markets LLC in New York, said yesterday in a telephone interview. Buying the bottler “extracts synergies and cost savings,” he said.
Dana Bolden, a Coca-Cola spokesman, and John Downs, a spokesman for Coca-Cola Enterprises, declined to comment.
The Wall Street Journal reported the talks earlier.
As of yesterday’s close, Coca-Cola Enterprises, based in Atlanta, had a market value of $9.4 billion. The stock soared 27 percent to $24.35 in extended trading.
Coca-Cola, also based in Atlanta, rose 33 cents to $55.16 in New York Stock Exchange composite trading yesterday. The stock rose 26 percent last year, while PepsiCo advanced 11 percent.

Beverage Concentrate

Coca-Cola and PepsiCo sell beverage concentrate and syrup to licensed bottlers, which add water and other ingredients, put the mixture in bottles and cans, and sell it. In 1999, PepsiCo followed Coca-Cola’s lead by spinning off its capital-intensive bottling operations to create Pepsi Bottling Group Inc. Coca- Cola currently owns about 34 percent of Coca-Cola Enterprises.
PepsiCo, the second-largest soft-drink maker, agreed in August to take control of its two biggest bottlers for about $7.8 billion, allowing the soda maker to garner about $300 million in cost savings and revenue.
PepsiCo’s takeovers of its bottlers, Pepsi Bottling Group and PepsiAmericas Inc., will give it control of about 80 percent of its North American beverage market. The acquisitions are expected to be completed by the end of the first quarter, PepsiCo, based in Purchase, New York, said in a regulatory filing Jan. 11.

Volume Growth

North American volume at Coca-Cola Enterprises declined 5 percent last year, while net pricing per case increased 6.5 percent, the company said in a Feb. 10 earnings report.
Coca-Cola Enterprises is committed to a return to volume growth in North America, Chief Executive Officer John F. Brock said in a Feb. 17 presentation at the Consumer Analyst Group of New York conference in Boca Raton, Florida. Results improved in the fourth quarter of last year compared with the third quarter, he said.
“Overall, we must continue to manage our North American business in a way that does deliver improving results and provides the resources we need to invest in the business,” he said at the time.

–With assistance from Serena Saitto and Greg Bensinger in New York. Editors: Elizabeth Wollman, Jennifer Sondag

To contact the reporter on this story: Zachary R. Mider in New York at +1-212-617-4935 or mider1@bloomberg.net; Duane D. Stanford in Atlanta at +1-404-507-1307 or dstanford2@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at +1-212-617-2716 or jsondag@bloomberg.net.

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