Friday, November 21, 2008

Coke is it

People love it, it is ones of the worlds most enduring and loved brands. Warren Buffett loves it and has a massive shareholding in the American icon.

In this day and age of dwindling fortunes and sagging sales this brand is a stalwart and Lion Nathan [LNN.NZX], the Australasian brewer, wants a piece of the Australian company that makes the black sticky concoction in this part of the world, Coca-Cola Amatil [CCL.ASX]

Lion Nathan previously owned the loss-making Pepsi franchise in Australasia so clearly see a non-alcoholic soda drinks company as integral to its alcohol brands.

Buffett calls companies like Coca-Cola Amatil "economic moats". That is, a company that has a strong brand and a product that is unique, enduring, easy to understand and sells, even during hard times.

Lion Nathan execs must have been reading some of Warrens screeds of pronouncements on his investing principles because they have their target right. The only problem being they haven't offered CCL Amital stockholders enough for their sweet black goldmine.

Lion have offered only AU$ 7.7 billion for Coca-Cola Amatil . The cash and stock bid, made at a 25 per cent premium to cokes share price, has been roundly criticised by CCA management as "unattractive" and "complicated". The offer from Lion gives Coke shareholders stock in Lion Nathan which is majority controlled by Kirin, the Japanese brewer.

The parent company and approx 30% shareholder in CCA will not comment on the matter but its CFO said last month to analysts:

"if the purchaser had the financial and the management resources to really grow that market for the long term, and that when selling we would sell if at fair value."

The stock and cash offer, even at a 25% premium is still below "fair value" and its is unclear as to whether Lion's management would grow the Coke brand and its other products long-term but of course the answer to that would be why wouldn't they?

The CCL Amital parent company, The Coca-Cola Company [NYSE: KO], wouldn't necessarily go for a higher price for their 30% shareholding but a company that would provide a higher return for their providing the syrup for finished product, which they get whoever owns CCL Amital.

Coke is a strong brand with a massive market share in this part of the world and that and its other strong brands; Fanta, Sprite, Lift, Lift Plus, Powerade, L&P and Schweppes make Lions initial bid too low by far.

Hang on CCL stockholders, don't sell yet.



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Related Links

Buffett and Coke

CCA Shareholder centre

2007 AR

2007 SR

2008 NOM

Complete
2007 annual report
PDF format (802kb)

Complete
2007 Shareholder Review
PDF format (2.6mb)

Notice of Meeting
PDF format (235kb)


From Amazon


For God, Country, and Coca-Cola: The Definitive History of the Great American Soft Drink and the Company That Makes ItFor God, Country, and Coca-Cola: The Definitive History of the Great American Soft Drink and the Company That Makes It by Mark Pendergrast
Buy new: $15.61 / Used from: $5.73
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The Real Thing: Truth and Power at the Coca-Cola CompanyThe Real Thing: Truth and Power at the Coca-Cola Company by Constance L. Hays
Buy new: $10.85 / Used from: $4.60
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Petretti's Coca-Cola Collectibles Price GuidePetretti's Coca-Cola Collectibles Price Guide by Allan Petretti
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Coca-Cola: The Collector's Guide to New and Vintage Coca-Cola MemorabiliaCoca-Cola: The Collector's Guide to New and Vintage Coca-Cola Memorabilia by Randy Schaeffer
Buy used from: $4.85

Other Coca Cola books from Amazon


c Share Investor 2008