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Coca-Cola signs letters of intent to refranchise bottling operations in the US

DBR Staff Writer Published 26 May 2016

The Coca-Cola Company has signed letters of intent (LOI) to refranchise its bottling operations in the US.

Coca-Cola jv

The deal includes territories in Texas and parts of Oklahoma, New Mexico and Arkansas, which form the Southwest operating unit of Coca-Cola Refreshments (CCR).

Through the LOI, Coca-Cola will support the Southwest operating unit, including distribution and production operations, in exchange for 20% equity stake in a new, privately held entity, AC Beverages.

This new entity will also include Arca Continental's beverage businesses in Latin America. Mexico-based Arca Continental will remain traded on the Mexican Stock Exchange.

While Alabama-based Coca-Cola Bottling Company United will become a joint venture partner in the US operations of AC Beverages,Arca Continental will hold majority stake in it. United will add the remaining territory of Oklahoma acquired from Coca Cola to AC Beverages and it will independently operate all other territories that are not under the joint venture.

The AC Beverages-United joint venture, which will be based in the US, will own 11 cold-fill production facilities in El Paso, Dallas, Fort Worth, San Antonio, McAllen, Abilene and Nacogdoches, plus two in Houston. The other two facilities are in Oklahoma City and Okmulgee, Okla.

The joint venture will become part of National Product Supply Group (NPSG), which is responsible for carrying out key activities for member bottlers including cold-fill beverages production.

In another development, Missouri-based Ozarks Coca-Cola Bottling Companyhas signed letter of intent to acquire territories owned by Coca-Cola in Northwest Arkansas and few pockets of Kansas and Oklahoma.

These letters of intent are part of the company's efforts to refranchise its North American bottling territories. The refranchising program is slated to be completed by the end of 2017.

Coca-Cola North America president Alexander "Sandy" Douglas Jr. said: "These are important agreements that will bring a valued, new partner into the U.S. Coca-Cola system. Arca Continental is a strong Coca-Cola bottler that has done a great job developing and sharing best practices in its long-standing history.

"Arca Continental will be a tremendous partner with UNITED in serving a major region of the United States, and the companies will benefit from having contiguous borders for their territories. The Coca-Cola Company is also pleased to gain an additional equity stake in an international bottler that is vital to our long-term success."

Image: Coca-Cola Company plans to hold 20% stake in Arca Continental Beverages. Photo: Courtesy of The Coca-Cola Company.

Source: Company Press Release