Coca-Cola Acquires Aujan Stake
January 7th, 2012Coca-Cola announced in October that it was looking to further expand into the Middle East. Towards that end, Coca-Cola and Aujan Industries signed an agreement that marks one of the largest multinational investments in the consumer-goods industry in the region (see Aujan Industries and The Coca-Cola Company Announce Signing of $980 Million Agreement).
Under the terms of the agreement, The Coca-Cola Company will acquire 50 percent of the Aujan entity that holds the rights to Aujan-owned brands, and 49 percent of Aujan’s bottling and distribution company…
As many of you know, I am generally skeptical of acquisitions (see Great Shareholder Ripoff and Why M&A Deals Go Bad). I am even more skeptical of international deals, especially those in developing markets (see So You Want to Do Business In a Developing Country?). But this one might just be different…
“As one of the region’s leading beverage companies, this partnership will allow us to unlock new and substantial opportunities,” said Sheikh Adel Aujan, Chairman of Aujan Industries. “Drawing upon Aujan’s deep regional insights and the international capabilities of The Coca-Cola Company, Aujan will continue to leverage the strength of its leadership team and is now positioned for even greater success in the region and internationally.
I think that analysis is pretty spot on. This agreement allows a combination of Aujan’s local expertise with Coca Cola’s branding and distributional capabilities. If they are able to successfully avoid the kind of partner conflict that often scuttles alliances of this sort, Coca-Cola and Aujan will be able to work together to enhance the sales of Aujan’s products by leveraging Coca-Cola’s 80+ years of international experience and existing distribution network throughout the Middle East. In fact, it is similar to the Pepsi Wimm-Bill-Dann deal – another deal that I liked (see Pepsistroika).
So taking stock, I believe that the Coca Cola deal might just have a shot at increasing shareholder value.
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January 8th, 2012 at 7:46 am
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January 10th, 2012 at 2:30 am
How many of us remember the no god no prophet controversy
http://muslimmatters.org/wp-content/uploads/coca-cola1_SXBai_17891.jpg
The point i want to make is that the existing markets of Ajuan are not purely driven by business sense.
The existing markets are all unstable,(mostly) anti american (you can be sure of that) and volatile.
remember the exit of coca cola from india in the 70s.? or ban on danish cheese because someone drew prophet in a cartoon.
This might be a good investment but its a potential hazard which might backfire, and will surely backfire sooner or later given the conflicting interests of the existing markets and the holding companies nationality.
January 10th, 2012 at 10:13 am
Good point Vivek. There is certainly the possibility that they will face challenges.
Coca Cola has struggled at times in the Middle East. They have also lagged Pepsi, the regional leader.
That said, Coca Cola does have a significant amount of operating experience in the Middle East, and they also acquired a stable of brands from Aujan (especially Rani and Vimto) that many Middle Eastern consumers do not view as “American” brands.
Time will tell…
We will definitely see…
February 20th, 2012 at 1:10 pm
A great site for Coca-Cola collectables
http://stores.shop.ebay.com/slugpuddleproducts
CHECK IT OUT