(Getty)
  • The Coca-Cola Company plans to list its African bottling operations – the eight-largest bottler in the world – on the JSE and in Amsterdam.
  • This is is a welcome addition to the local stock exchange, which has lost half of its listings in the past two decades. 
  • The company will offer local investors a solid, profitable business, one analyst says.
  • For more articles, go to www.BusinessInsider.co.za.

Africa’s largest bottling operation is heading to the JSE, a much-needed boost for the bourse which has been bleeding companies for some time.

The market has lost almost half its listings in the past two decades. Twenty companies were delisted from the JSE last year, with Afrox, Clover, Lonmin, Pioneer Foods, Verimark, and Group Five among the biggest recent exits.

But this week, American giant The Coca-Cola Company announced that it will list its African bottling operation in Amsterdam and on the JSE within the next 18 months.

Coca-Cola Beverages Africa (CCBA) is the biggest bottler on the continent, and the eighth biggest in the world. It has 16,000 employees (half of whom are in South Africa) and 40 bottling plants in 14 territories, which produce 40% of all Coca-Cola products sold in Africa by volume.

Its listing will be significant for the JSE, says First National Bank portfolio manager Wayne McCurrie. It will offer local investors access to a solid, profitable business which doesn’t have much competition in its markets, he says.

The company has seen various iterations, including as Amalgamated Beverage Industries (ABI), which was previously listed on the JSE. It was delisted in 2004, after SABMiller bought out minority shareholders.

In 2016, CCBA was established after The Coca-Cola Company combined its Southern and East Africa bottling operations with that of SABMiller and the real estate investment company Gutsche Family Investments.

But in 2017, Anheuser-Busch InBev took control of SABMiller and wanted to sell its 54.5% stake in CCBA. The American behemoth Coca-Cola bought the share for $3.15 billion in 2017.  This means that at that time the company had a valuation of around $5.8 billion – or R83 billion at the current exchange rate.

If that was the current market value, the company would be roughly the same size as Shoprite, which has a market capitalisation of R86 billion and is among the 40 biggest shares on the JSE.

But McCurrie says the quantum of the listing will still need to be determined, given that there isn’t currently much published information about its profitability. He doesn’t expect the listed CCBA will be among the JSE’s top 40, but will be among the 100 largest shares.

Why is Coca-Cola listing its African bottling assets?

In its latest quarterly results, released this week, The Coca-Cola Company says its bottling investments across the world saw unit case volume growth of 5%, “primarily due to solid growth in sparkling soft drinks in India and South Africa”.

So why does it want to sell out of CCBA?

Over the past couple of years, Coca-Cola has tried to shift its business away from bottling, which has low margins and require a lot of capital, to focus on selling cooldrink concentrates and developing new products. It has sold many of its bottling assets in the US and elsewhere.

So when Coca-Cola bought SABMiller’s stake in 2017, it was supposed to be a temporary arrangement, and the company said it wanted to find a new owner for its combined 66.5% stake in CCBA. (Gutsche Family Investments owns the rest.)

This didn’t happen, and it has chosen to list the company instead.

This week, Coca-Cola CEO and chairperson James Quincey described CCBA in an analyst briefing as a “strong, well-structured, capable bottler”, who look set to benefit from “long growth” in the African market, which has “the youngest billion people” in the world.

“(We've) ultimately come to the conclusion, it would be right for the development of the business in Africa to have an African headquartered African bottler that is operating on the continent. And so the read-through is we believe in the future of Africa as a continent, as an economy, we think we've got a great, capable bottler that can help lead our ability to grow there and then an IPO will allow us to set that up to be a source of growth for many years to come.”

Why will its primary listing be in Amsterdam?

In a nutshell: Coca-Cola believes more international pension funds and global asset managers will buy shares in the African bottler if it is listed in the Netherlands.

According to a CCBA spokesperson, the Amsterdam listing will provide access to “the deepest institutional investor base (particularly pan-European, UK, US investors), greater research coverage from analysts covering other international bottlers and greater liquidity.”

The Amsterdam market also hosts Coca-Cola European Partners (CCEP), the British bottling company – so it’s “tried and tested with other successful listed bottlers”.

“Regardless of the primary listing being in Amsterdam the home of CCBA will very much remain in South Africa, with South Africa continuing to be CCBA’s country of incorporation and tax residency and home to its headquarters and management team,” the spokesperson said.

What about Coca-Cola’s empowerment deal in SA?

As part of the conditions for the creation of CCBA in 2016, and Coca-Cola’s deal with AB-Inbev in 2017, the local group had to commit to various broad-based black economic empowerment and employee shareholding requirements.

Recently, the Competition Tribunal agreed to change the original requirements for the South African bottling company (Coca-Cola Beverages SA), which has been reduced to 20% B-BBEE ownership. The company said that staff will now own 15% of the SA company – from 5% previously. The workers will also have two board seats.

The company’s spokesperson that that the listing will not impact the empowerment scheme in South Africa in any way.

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