Is Coca-Cola Amatil Limited a takeover target?

Brewer Lion may be considering another takeover bid, five years after making its first bid

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Soft drink bottler Coca-Cola Amatil Limited (ASX: CCL) has run into a wall of issues in recent times, and it can add two more issues to its current list.

Tropical cyclone Ita has wiped out an estimated 90% of the sugar cane crop in far North Queensland. The damage bill is estimated in the tens of millions of dollars, but could force sugar prices higher. As you can probably guess, sugar is a major ingredient in many of Coca-Cola Amatil's (CCA) products.

The second issue is that thanks to the company's shares falling in value, CCA could become a takeover target. In 2008, brewer Lion made a $7.3 billion bid for Coca-Cola Amatil, but withdrew from talks, after The Coca-Cola Company refused to sell its 30% share in CCA. Lion offered $10.80 per CCA share, which is higher than today's price of $9.38.

At the time, Lion estimated the combined company would deliver between $100 and $130 million in synergies per year. CCA said that Kirin was a major competitor in the juice and flavoured milk market in Australia, and a number of conditions would have to be met around those, before Coke would consider the deal.

Coca-Cola Amatil is facing massive aggressive discounting from competitors as well as pricing pressures from supermarket players Woolworths Limited (ASX: WOW) and Coles – owned by Wesfarmers Limited (ASX: WES). When CCA is selling cans of Coke for around 50 cents (in cartons, which are almost always on sale) try and imagine how much it costs CCA to produce that can. CCA could also be facing increased competition from a new player on the block in Bionade, as I mentioned in this article.

CCA's fruit and vegetable processing subsidiary SPC Ardmona is similarly struggling with overseas competition and high local labour costs. And Coca-Cola Amatil's Indonesian operations are struggling, thanks to a 20% depreciation of the Indonesian Rupiah.

Foolish takeaway

You'd have to think that Lion may well be reconsidering a bid for Coca-Cola Amatil, given the 35% fall in CCA's share price over the past year. CCA would be a good fit for Lion, although some segments – like juice and flavoured milk – may raise ACCC concerns. Watch this space.

Motley Fool writer/analyst Mike King owns shares in Coca-Cola Amatil and Woolworths. You can follow Mike on Twitter @TMFKinga

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »