Coke in Talks to Buy U.S. Unit of Its Biggest Bottler

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February 24, 2010, 8:37 pm

The Coca-Cola Company is in talks to buy the North American operations of its largest bottler, according to a person briefed on the matter, reversing a 14-year-old strategy of separating its bottling operations from its main soft drink business.

Under the terms being discussed, Coke would acquire the North American operations of the bottler, Coca-Cola Enterprises, this person said. Coca-Cola Enterprises, or C.C.E., would then pursue more of Coke’s bottling operations in Europe, like in Germany and Scandanavia. Including debt, the value of a deal could be worth more than $13 billion.

The boards of the two companies were expected to meet Wednesday night, though the talks were still continuing and may not result in a deal, according to this person, who asked not to be identified because the negotiations are private.

Representatives for Coke and C.C.E. could not be reached for comment on Wednesday evening.

If a deal is reached, it would mark the end of Coke’s idea of keeping its main operations — the development and marketing of the syrup concentrates that form the basis of its fizzy drinks — from the production and distribution of the end products.

Coke pioneered the strategy, beginning with its spinoff of C.C.E. in 1986 after having consolidated several of its disparate regional bottlers. The move was born in part of financial engineering, with the spin-off of so-called anchor bottlers meant to free up their parent companies’ balance sheets.

Coca-Cola Enterprises, which serves as Coke’s main bottler in North America and Western Europe, sold about 41 billion bottles and cans last year, and its output represented about 16 percent of Coke’s worldwide product volume. Based, like Coke, in Atlanta, the bottler reported a $731 million profit for the year, according to a regulatory filing.

But Coke and its main rival, PepsiCo, have faced a slide in the demand for carbonated beverages in recent years. Reacquiring bottling operations is meant to give Coke greater flexibility in adapting to consumer tastes, such as a move toward juice drinks and water.

Last year, PepsiCo paid $7.8 billion to acquire its two main bottlers, the Pepsi Bottling Group and PepsiAmericas.

While Coke and C.C.E. have sometimes had a strained relationship, the two have grown tighter in recent years. Coke’s current chief executive, Muhtar Kent, spent part of his career in various Coke bottling operations.

Coke remains the bottler’s largest shareholder, owning about 34 percent.

News of the talks was first reported by The Wall Street Journal online.

– Michael J. de la Merced