Three Coke Bottlers in Talks to Merge

Three bottlers of Coca-Cola Co. products in Europe are in advanced talks for a merger that would further a push by the U.S. soda giant to consolidate its bottlers around the world and lower costs.

Coca-Cola Enterprises Inc. is discussing a tie-up with Coca-Cola Iberian Partners and Germany's Coca-Cola Erfrischungsgeträ nke AG, according to people familiar with the matter. Terms of the potential deal couldn't be learned, but it is likely to be valued well into the billions of dollars.

Atlanta-based Coca-Cola Enterprises, a big, independent Coke bottler in Western Europe, has a market value of $10.8 billion. Coca-Cola Iberian Partners, also independent of Coca-Cola, is closely held. Coca-Cola owns the German business.

As with all merger talks, and especially complicated ones such as these, it is possible they could fall apart before a deal is reached.

The deal would fit into a pattern of recent activity on Coke's part. Amid falling soda sales in many of its markets including Europe as consumer tastes migrate toward healthier fare, the company has been seeking to merge its smaller overseas bottlers into bigger, more efficient operations that will be better able to market and advertise Coke and other beverages and have more flexibility in pricing and packaging. Consumers have been moving away from high-calorie soft drinks toward bottled water, energy drinks and teas, taxing smaller, less efficient and flexible bottlers.

Coke has simultaneously been grappling with the refranchising of its North American bottlers, which has been expensive and slow to pay-off.

Coke produces concentrates that it distributes to hundreds of mostly independent bottling partners across the globe. Making and selling concentrate is a higher-margin and less-capital-intensive business than bottling the soft drinks.

In 2013, the Atlanta beverage giant helped negotiate a merger between seven Spanish and one Portuguese Coca-Cola bottlers, creating the Iberian Partners business. The same year, it sold its bottling assets in the Philippines to Coca-Cola Femsa SAB, its Mexican bottler. And last year, it helped forge a deal to combine bottling operations in Southern and Eastern Africa into one serving 12 countries.

Coca-Cola Enterprises was created in its current form after Coke bought in its North American operations in 2010. It is the sole licensed bottler for Coca-Cola products in Belgium, continental France, Great Britain, Luxembourg, Monaco, the Netherlands, Norway and Sweden.

Second-quarter revenue at CCE dropped 17.5% from the year-earlier quarter to $1.9 billion, the company reported Thursday. Chairman and Chief Executive John F. Brock attributed the weakness to a consumer environment in Europe that is crimping demand in the nonalcoholic, so-called ready-to-drink category.

Amid the softness, Coca-Cola Iberian Partners tried to lay off workers last year, but Spain's Supreme Court ruled that the company had to rehire employees and provide back pay. The company is owned by Spanish families, who have been partners with Coca-Cola since 1951.

The European bottler tie-up would come amid other big-deal activity among consumer companies in the strongest mergers-and-acquisitions market in years. This month, Kraft Foods Group Inc. completed a merger with H.J. Heinz Co. valued at roughly $50 billion. Earlier this month, Coty Inc. agreed to buy a number of beauty brands from consumer giant Procter & Gamble Co. for $13 billion.

Tripp Mickle contributed to this article.

Write to Shayndi Raice at [e-mail], Dana Mattioli at [e-mail] and Betsy Morris at [e-mail]

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