Coca-Cola Bottling Co. Consolidated’s COKE shares gained more than 9% since the company announced the signing of a non-binding letter of intent with The Coca-Cola Company KO on Sep 24. Per the deal, Coca-Cola Bottling will purchase Coca-Cola’s manufacturing plants in Virginia, Maryland, Indiana and Ohio.
The manufacturing facilities to be bought by Coca-Cola Bottling are operated by Coca-Cola’s wholly owned subsidiary, Coca-Cola Refreshments (CCR). Coca-Cola took over CCR in 2010 when it acquired the North American operations of Coca-Cola Enterprises, Inc. CCE. The deal is subject to the companies reaching a definitive agreement. These facility transfers are likely to begin in the first half of 2016.
Coca-Cola Bottling, one of the largest independent bottler of Coca-Cola, also announced the signing of a definitive agreement with Coca-Cola, sealing the letter of intent signed by the parties in May this year.
Under the definitive agreement, Coca-Cola Bottling’s franchise distribution territory will be expanded to include newer markets within Delaware, the District of Columbia, Maryland, North Carolina, Pennsylvania, Virginia and West Virginia. The transactions are expected to begin in the fall of 2015 and conclude by mid-2016. Coca-Cola Bottling notified that it is still working with Coca-Cola on the rest of the territory expansion, first agreed on in May, which includes territories in parts of Ohio, Indiana, Illinois and Kentucky.
Other than Coca-Cola Bottling, Coca-Cola also announced that it will divest some production plants to its other bottlers — Coca-Cola Bottling Company United (United) and Swire Coca-Cola USA (Swire) — to cut costs, streamline production system and generate higher returns on investments. United will acquire plants in New Orleans, while Swire will buy the Arizona and Colorado facilities. These facilities will be transferred between 2016 and 2018.
While Coca-Cola Bottling has not been assigned a Zacks Rank, Coca-Cola has a Zacks Rank #4 (Sell). A better-ranked beverage stock, Primo Water Corporation PRMW sporting a Zacks Rank #1 (Strong Buy), is worth a look.
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