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SABMiller, Coca-Cola strike deal with South African government for bottling operations merger

DBR Staff Writer Published 05 May 2016

SABMiller and Coca-Cola have entered into an agreement with South African government to go ahead with the much-awaited merger of their bottling operations.

SABMiller-Coca cola

In November 2014, Coca-Cola, SABMiller, and Gutsche Family Investments had agreed to to combine their bottling assets.

However, the deal had hit a roadblock with the South African government expressing concerns over job losses from the merger.

Later, the merger parties made commitments ensuring that the merged entity would maintain the total permanent employment at the present level for three years after getting approval for the deal.

South Africa Minister of Economic Development Ebrahim Patel said: "Employment creation and development of small businesses are a vital part of building a more inclusive economy. The commitments made by the merger parties will open access to cooler space in smaller spaza shops and retail outlets to competing brands.

"Employment levels will be protected for three years. The R800 million commitment builds on a number of similar commitments made recently which, taken together, will be a major boost for small-holder farming.

They also ensured that the employees would not face involuntary retrenchment and layoffs at senior management level would be limited.

Besides, the companies agreed to invest ZAR800m ($53.8m) in enterprise development of the two companies.

The parties made a commitment to to create a ZAR400m ($26.9m) fund for enterprise development in the agriculture value chain to support developing farmers and small suppliers.

An incremental investment of ZAR400m ($26.9m) to develop downstream distribution and retail capacities and skills development and training is another commitment made by the companies to allay fears over the merger.

SABMiller CEO Alan Clark said: "I am very happy that we have reached this agreement and hope we now have a clear path to the conclusion of this transaction and the creation of Coca-Cola Beverages Africa.

"As the location of CCBA's headquarters, South Africa will be the heart of this business and our belief is that our commitments will provide a strong footing from which the business will flourish in South Africa and across the continent."

The Coca-Cola Company president and COO James Quincey said: "Today's announcement ensures that the creation of Coca-Cola's largest bottling partner in Africa will strengthen our business while also closely aligning with the South African government's national imperatives for social and economic development.

Coca-Cola has been firmly committed to our business in Africa and supporting local communities since we first began operations in South Africa almost 90 years ago, and this agreement marks the latest important step in that journey."

Image: SABMiller, Coca-Cola strive to combine bottling operations. Photo: Courtesy of Mister GC/FreeDigitalPhotos.net.