Coca-Cola Enterprises Inc., an independent bottler of Coke products in Europe, surged the most in more than five years on a report that it’s considering a three-way merger with two other bottlers.
The company is in advanced talks with Coca-Cola Erfrischungsgetränke AG in Germany and Coca-Cola Iberian Partners, which serves Spain and Portugal, according to the Wall Street Journal. The report sent the shares up 12 percent to close at a record $51.08 in New York, marking the biggest one-day gain since February 2010.
The transaction would further Coca-Cola Co.’s goal of consolidating bottling operations around the world and cutting expenses, according to the Journal. Though the beverage giant is a separate business, it works closely with the bottlers and has been seeking to streamline operations. Coca-Cola’s efforts to reduce costs helped its results top analysts’ estimates last quarter.
The question is whether a three-way deal would be worth it for Coca-Cola Enterprises, said Pablo Zuanic, an analyst at Susquehanna International.
“The German deal has been talked about for some time, but the Iberian side of the equation is new,” he said in a note on Friday.
If Coca-Cola Enterprises acquires the Iberian bottler for $5 billion, that would boost profit, he said. But including the German company in the bargain would limit near-term earnings growth, Zuanic said. He estimates that the German business would cost $7 billion.
Coca-Cola Enterprises could fund as much as $5 billion of the three-way transaction on its own, requiring it to raise an additional $7 billion, he said.
“With a current market cap of $10 billion, this could be quite dilutive,” Zuanic said.
Coca-Cola Enterprises and Coca-Cola Erfrischungsgetränke didn’t respond to requests for comment from Bloomberg News. Coca-Cola Iberian Partners declined to comment.
Shares of Coca-Cola Enterprises -- which has its headquarters in Atlanta, like Coca-Cola Co. -- were up 2.8 percent this year through Thursday’s close.