Aboitiz Equity Ventures Inc. on Thursday bared plans of reallocating the proceeds of its P17.45 billion bond sale to fund the acquisition of Coca-Cola Beverages Philippines Inc. which bottles and distributes Coca-Cola products in the country.
“AEV recently announced its plan to offer up to P17.45 billion worth of fixed-retail bonds by the third quarter of this year. It also has cash generated from the recent sale of a portion of its stake in its power business as well as cash generated from operations,” the holding firm of the Aboitiz Group said.
Prior to this development, AEV also bought out Megawide and its Indian partners at the GMR Megawide Cebu Airport Corp. that operates the Mactan Cebu International Airport in a series of transactions worth P25 billion that completes next year.
Given acquisition cost of $1.8 billion, AEV will have to come up with $720 million or P40 billion to cover its 40 percent share of the transaction.
Aboitiz has partnered with Coca-Cola Europacific Partners PLC, which has controlling stake, in the acquisition of the bottling company.
Luis Limlingan, managing director at Regina Capital Development Corp, said the Coca-Cola transaction is an opportunity for AEV to diversify and a good addition to its food segment.
“However, the main challenge lies in the high tax on sugar,” he noted.
According to Abacus Securities Corp, the acquisition could prove most expensive for the company moving forward.
“The reason why CCBPI ownership changed hands many times over the past two decades is an indication that it’s not exactly a great asset. Of course that’s in the past but Coca-Cola US reported in its latest quarter that volume in the Philippines has declined,” it said.
CCBPI volume the past six years grew at a compounded rate of 2.2 percent, ostensibly affected by the sugar tax in 2018 and barely above the population growth rate, it added.
“Moreover, CCEP wrote in its own press release that CCBPI generated profit before tax of $90 million last year. On an after tax basis, the $1.8 billion valuation would imply a price to earnings ratio of about 27 times. Even if net profit grows 20 percent through 2024, it would still be pricey at 22 times. This gives an earnings yield of 4.5 percent which is likely lower than AEV’s cost of money,” it said.
Once completed, the two companies will gain a foothold in an operation that has a supply chain footprint of 73 production lines and 19 plants, that enjoys a strong customer base, and services more than one million outlets.
The acquisition is subject to a number of conditions, including satisfactory completion of confirmatory due diligence approval by AEV and CCEP’s respective boards, and the signing of definitive agreements.
The deal is set for completion by end of this year.
