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#Takeover @ $13.50
Added 4 months ago

15-Feb-2021:  First off, I'll refer people to my straw from last week about the CCL takeover offer (from CCEP) at $12.75/CCL share.  Today (15-Feb-2021), as I foreshadowed in that straw last week, CCEP raised their offer price from $12.75 to $13.50 and declared that $13.50 was their "best and final" offer.

Naturally, Coca-Cola Amatil’s Related Party Committee (CCL Board less members associated with TCCC) and their Group Managing Director (Alison Watkins) have unanimously recommended the increased offer, as they did the previous offer.

CCL are now trading at around $13.39 to $13.40, suggesting the market thinks this is the final and highest bid.

For today's announcement - see here:  CCEP Increases Offer Price

The scheme meeting for shareholders to approve (vote on) the proposal is now scheduled for mid-April, and subject to a "yes" vote and court approvals (usually goes smoothly, FIRB have already said they have no objections so will not block this), the scheme implementation date should be late April or early May, which is when shareholders will receive their $13.50 in cash per CCL share they hold.

If I was holding (I am not), I would probably take the $13.39 to $13.40 on offer today, even though the chance of this one NOT going through now is probably pretty slim.  It will go through.  No chance of the federal treasurer blocking this one like Joe Hockey did when Alison Watkins tried to sell Graincorp to the Canadians last time.  Drinks are not viewed as critical in the same way as our Australian grain infrastructure, logistics and trading desks (and systems/processes) are.   

CCL are up around +2% from where they were trading last week, and the upside from here to the $13.50 offer price is less than 1% (0.75% - three quarters of one percent).  I'd personally happily take that 0.75% (less than 1%) haircut to guarantee a certain profit on this one, if I held (which I do not).  Otherwise, holders can do nothing and they should receive their $13.50/share in either late April or early May and not have to pay any brokerage (as the acquirers [CCEP] obviously pay all of the costs).

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#Takeover @ $12.75
Added 4 months ago

09-Feb-2021:  I used to work for Coca-Cola Amatil up until when they gave me a redundancy payout and closed down their Thebarton manufacturing plant in South Australia in 2018.  We used to produce carbonated soft drinks (CSDs), fruit juice, Powerade and alcoholic ready-to-drinks (ARTDs, a.k.a. pre-mix) in cans, glass and PET (plastic bottles).  There was also a bag-in-box line for the post-mix (or "soda fountain") market, with McDonald's and Hungry Jacks being two of the biggest consumers of those.  That's all gone now - partly to WA, but mostly to their Richlands plant in Queensland (on the Ipswich side of Brisbane).  A friend rang me up a little while ago (today) and asked me if he should sell his shares, considering there was a takeover offer priced at A$12.75/share - from Coca-Cola European Partners plc (‘CCEP’) - that has progressed to a scheme implementation deed (SID), and has now received FIRB approval as well.  And CCL shares are trading at over $13/share.  Strange!  I said, "give me half an hour and I'll call you back."

So what's the go?  The "go" appears to be that CCL released a 4Q20 and 2020 Full Year (FY20) Trading Update on 22-Jan-2021 - and things were travelling better than expected it seems.  The SP rose from $12.91 to $13.20 over the next two trading days and has traded as high as $13.34 since then.  They are back down at around $13.11 to $13.12 now, as I type this.

For those with AFR access - https://www.afr.com/companies/manufacturing/coca-cola-amatil-takeover-delayed-as-investors-call-for-higher-bid-20210125-p56wqp

And:  https://www.afr.com/street-talk/coca-cola-amatil-shares-fly-as-hedgies-punt-on-coke-system-deal-20210204-p56zkw

For those who do not have AFR access (assuming those links do not work), the following one should:

https://www.smh.com.au/business/companies/coke-takeover-price-under-water-as-share-price-bubbles-20210125-p56wp9.html

In summary, the offer was poorly timed, and the January Trading Update from CCL has resulted in many market players assuming that CCEP are going to have to increase their offer to get this one over the line.  Some players, including hedge funds, have been betting on this outcome by buying blocks of CCL shares at prices above that $12.75 offer price.  The general consensus (according to the AFR) appears to be that CCEP are going to have to stump up around $13.50 to $14.00/share to get this one through.

Poor old Alison Watkins.  She's not particularly poor, or old, so I'm possibly being a tad sarcastic there.  Her last gig was heading up Graincorp until they received a takeover offer in 2013 from huge Canadian-based company Archer Daniels Midland (ADM) which was unanimously recommended to shareholders by Alison and the rest of the Graincorp board, but was blocked at the last hurdle by then Federal Treasurer Joe Hockey - see here.  

Watkins promptly left Graincorp to take on the top job at Coca-Cola Amatil (CCL), replacing Terry Davis, best known for taking CCL into alcohol (manufacturing beer + ARTD's and distributing spirits).  Alison's legacy was consolidating operations into less plants (bottling in less Australian states, and using less factories), and reducing costs, particularly salaries and wages, in preperation for a takeover by a large international player, just as she had done at Graincorp.  

Let's hope she can get this CCL takeover over the line.  Because 30.8% of CCL is owned by The Coca Cola Company (TCCC) of Atlanata, Georgia (NYSE: KO), and most of CCL's products are produced under licence from TCCC, no takeover attempt has a snowball's chance in hell of succeeding unless TCCC backs it, and TCCC are backing this one. 

Incidentally, TCCC also own 18% of CCEP (Coca Cola European Partners), who are attempting to takeover CCL.  Another 34% of CCEP is owned by Coca-Cola Iberian Partners, one of the largest European independent Coca-Cola bottling companies, and TCCC own part of them as well.  TCCC (the parent "Coke" company) like to have blocking stakes in every publicly listed independent bottler globally that they license to produce Coke products, and that is why they hold 18% of CCEP and 30.8% of CCL.  It's enough to entitle them to Board representation and allows them to block any undesirable takeover attempt, but it also allows for reduced execution risk.  TCCC is always the largest supplier of raw materials to these bottlers, and they want them to succeed because it means more money for them of course.  They also want to closely manage the Coca-Cola brand and image worldwide, and having board seats with all of their bottlers helps with that aim.  But they don't want to have to deal with the everyday headaches of manufacturing, sales and distribution.  That is left up to those independent bottlers, and CCL (Coca-Cola Amatil) was/is one of those.

Anyway, I rang Sam back and said that I'd probably give it a couple of weeks.  The vote has been pushed back until at least March (from February) at this stage, and the word is that CCL's chosen independent expert, Grant Samuel, might have to change their original finding that the offer is "fair and reasonable" to existing CCL shareholders in light of the better-than-expected CCL trading update in January.  There really is no decent control premium built into this offer price - at $12.75/share.  I agree that the most likely outcome will be an improved offer price some time in the next couple of weeks to guarantee the right outcome when shareholders vote on the proposal, so in light of that I do not think that taking the $13.11 to $13.12 on offer today is likely to give you the best outcome.  No harm in waiting a couple of weeks.

However for those who do NOT already own CCL shares (like me), I would not be buying them here in anticipation of a higher offer.  I think the upside is probably limited to around +6% (but in reality is likely to be closer to +3%) and the dowside is around -3%, unless they withdraw the offer entirely of course, and then the dowside could be substantially greater.  The risk/reward scenario doesn't look particularly favourable to me for a quick trade.  I don't mind hanging on for a better offer if I'm already in there and paid a lot less than current prices for my shares, but I don't think current levels present a good entry point considering that small potential upside.

[I do not hold CCL shares.]

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#Bear Case
stale
Added one year ago

Coca-Cola Amatil is a good business with good leadership and a great history in Australia. These attributes will help it weather the storm of COVID19. 

It may not wash up on the shores as a wreck but the virus will cause some damage. Demand for beverages will be hit hard. Vending machines at train stations, office buildings, pubs, clubs, cafes and stock sold in convenience stores or service stations will be hit. Ask yourself the question about when you last bought or even saw one of these beverages?

If there's a second shutdown then I'd expect the stock to test 52w lows and head down toward $7.50 but if there's a steady pick up and continued growth then prices will return to ~$10.00- $11.00. For me, this stock is a watch until October/November and potentially buy into summer growth. 

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