Coca-Cola reaches agreement with South Africa over CCBA

Coca-Cola said on Thursday that it had reached an agreement with the South African government on a package of conditions addressing public interest considerations in connection with the proposed acquisition of AB InBev’s 54.5% stake in Coca-Cola Beverages Africa (CCBA).

The soft drinks giant reaffirmed its commitment to honour all merger conditions agreed with South African regulators when CCBA opened for business in 2016. Coke also agreed to ensure that the majority shareholder of CCBA will honour all merger conditions agreed at the creation of the company.

Furthermore, it agreed to increase black ownership of Coca-Cola Beverages South Africa (CCBSA), the local unit of CCBA by 30%, from a previously announced 20% as part of a black economic empowerment equity ownership.

The company also agreed to maintain CCBA’s head office in South Africa and will remain incorporated in the country for tax purposes.

Caving to mounting pressure from the South African government, Coca-Cola said it acknowledged the government’s preference for a South African majority shareholder in companies deriving most its revenue in the country. It adds that it would “seriously consider South African parties”. However, it emphasized that factors that would determine who gets the franchise in CCBA when it is spurn-off includes alignment with Coca-Cola’s values, depth of management, track record and the financial capacity to establish ownership of the estimated $3.15bn stake.

CCBA was originally formed in November 2014 by a merger of Coca-Cola’s South African operation with SABMiller’s non-alcoholic Southern African operations and Coca-Cola Sabco. The ownership structure at the time was 57%  SABMiller, 31.7% owned by Gutsche Family Investments, and 11.3% owned by The Coca-Cola Company. However, when SABMiller was acquired by AB InBev in 2016, SABMiller’s ownership interest was transferred to AB InBev. However, Coca-Cola which had a change-of-control clause (right-to-buy) in the partnership decided to exercise its rights and re-acquire the stake held by AB InBev.

CCBA was set up to serve 12 high-growth countries in Southern and Eastern Africa, which now includes Nigeria and Ghana. It is expected to account for about 40% of all Coca-Cola beverage volumes sold on the continent and generate about $2.9bn in sales annually.

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