Coca-Cola to Take Over North American Bottling Operations

The Coca-Cola Company, in a substantially cashless transaction, will acquire CCE’s entire North American business, which consists of approximately 75 percent of U.S. bottler-delivered volume and almost 100 percent of Canadian bottler-delivered volume.

26 Feb 2010 --- The Coca-Cola Company and Coca-Cola Enterprises Inc. announce that they have entered into agreements that will strategically advance the Coca-Cola system in North America and drive long-term value for all shareholders. In addition, the parties have an agreement in principle to expand CCE’s European business.

"Our 2020 Vision calls for decisive and timely action to continuously improve and evolve our global franchise system to best serve our customers and consumers everywhere. Consistent with the 2020 Vision, our roadmap for winning together, we act today as an aligned system" said The Coca-Cola Company’s Chairman and Chief Executive Officer Muhtar Kent. "We are not acquiring CCE, rather we are acquiring their North American operations, and they remain one of our key bottling partners with world-class management, financial and operational capabilities. We have a strong and unrelenting belief in our unique and thriving global bottling system. Our new North American structure will create an unparalleled combination of businesses, which will serve as our passport to winning in the world’s largest nonalcoholic ready-to-drink profit pool. This transaction offers compelling value to both The Coca-Cola Company and CCE shareowners and will create substantial and sustainable benefits for both companies’ stakeholders"

Mr. Kent continued, "Our North American business structure has remained essentially the same since CCE was founded in 1986, while the market and industry have changed dramatically. With this transaction, we are converting passive capital into active capital, giving us direct control over our investment in North America to accelerate growth and drive long-term profitability. We will work closely with our bottling partners to create an evolved franchise system for the unique needs of the North American market. Additionally, we will reconfigure our manufacturing, supply chain and logistics operations to achieve cost reductions over time. Importantly, the creation of a unified operating system will strategically position us to better market and distribute North America’s most preferred nonalcoholic beverage brands. At the same time, in Europe, we are further strengthening our franchise system to provide broader, contiguous geographic coverage and optimizing our marketing and distribution leadership"

CCE’s Chairman and Chief Executive Officer John Brock said, "This transformation creates significant near-term shareowner value through the sale of the North American business for fair value, delivering over $4 billion in cash to CCE shareowners, through cash distributions and planned share repurchases. At the same time, this enables our shareowners to retain equity in a sales and distribution company with an improved growth profile. In the future, CCE shareowners will also benefit from the expansion of our European business and our improved financial flexibility"

Mr. Brock added, "CCE remains the preeminent Western European bottler and a key strategic partner with The Coca-Cola Company. Our European business serves an attractive market with growing volumes and profit driven by rising per capita consumption. As such, CCE will have an improved profile with enhanced revenue, margins and EPS growth prospects. Together with The Coca-Cola Company, we will continue to improve the effectiveness of our operations in our expanded presence in Europe. These actions strengthen our ability to compete effectively and sustainably in Europe and represent the beginning of an exciting new era of long-term growth for CCE’s business and shareowners"

Mr. Kent concluded, "This is a truly historic day for the Coca-Cola system. As the world’s leading beverage Company, we are very excited about the vast opportunities before us and I can say with confidence there is no better business to be in. Over the next several years, the nearly $650 billion dollar global nonalcoholic ready-to-drink beverage industry is expected to grow faster than worldwide GDP and we are best positioned to capitalize on this enormous industry opportunity in North America and Europe. These joint actions further reinforce our confidence in achieving our 2020 Vision to more than double system revenue and double servings to over 3 billion per day. With our system more aligned than ever, the timing is right, and we believe that these actions will usher in a new era of winning for our Coca-Cola system"

The Coca-Cola Company, in a substantially cashless transaction, will acquire CCE’s entire North American business, which consists of approximately 75 percent of U.S. bottler-delivered volume and almost 100 percent of Canadian bottler-delivered volume. At the close of the transaction, The Coca-Cola Company will have direct control over approximately 90 percent of the total North America volume, including its current direct businesses. The Coca-Cola Company’s acquisition of the assets and liabilities of CCE’s North American business includes consideration of The Coca-Cola Company’s current 34 percent equity ownership in CCE, valued at $3.4 billion, based upon a thirty day trailing average as of February 24, 2010. In addition, consideration includes the assumption of $8.88 billion of CCE debt and all of the North American assets and liabilities – including CCE’s accumulated benefit obligation for North America of $580 million as of December 31, 2009, and certain other one-time costs and benefits.

In a concurrent agreement, The Coca-Cola Company and CCE have agreed in principle that CCE will buy The Coca-Cola Company’s bottling operations in Norway and Sweden for $822 million, subject to the signing of definitive agreements, and that CCE will have the right to acquire The Coca-Cola Company’s 83 percent equity stake in its German bottling operations 18 to 36 months after closing for fair value.

A new entity, which will retain the name Coca-Cola Enterprises Inc., will be created through a split-off that will hold CCE’s European businesses. CCE’s public shareowners will exchange each existing CCE share for a share in the new entity and will hold 100 percent of this new entity.

CCE will provide its shareowners, excluding The Coca-Cola Company, with a special one-time cash payment of $10 per share. In connection with the transactions, CCE expects to raise initial debt financing of up to 3.0x EBITDA to pay shareowners $10 per share in cash at closing, to acquire the Norway and Sweden bottlers and to fund the expected share repurchase program. Following completion of the transaction, it is expected that CCE will adopt a program to repurchase up to approximately $1 billion of shares and a policy of paying an expected annual dividend of $0.50 per share subject to the discretion of CCE’s Board of Directors and its consideration of various factors.

The Coca-Cola Company and CCE expect the transactions to close in the fourth quarter of 2010.