Hong Kong’s diversified business group, Swire Pacific, has inked a conditional agreement for selling its USA-based Swire Coca-Cola unit to JS&S, a full-fledged subsidiary of John Swire & Sons. The all-cash deal pegs the transaction at an impressive US$3.9 billion, which is approximately 12.4 times the earnings before interest, taxes, depreciation, and amortization (EBITDA) of about HK$2.46 billion that the unit reported in 2022.
The transaction’s progress is subject to the approval of Swire Pacific’s independent shareholders, as per the official statement released on the Hong Kong stock exchange. Once the sale culminates, Swire Pacific plans to give back a considerable portion of the net transaction proceeds to its shareholders via a special dividend, amounting to nearly HK$11.7bn. This value is roughly 50% of the disposal gain and surpasses the total dividends distributed over the previous three financial years.
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The deal’s significance lies in its ability to actualize the target group’s value at a notably lucrative valuation that exceeds its book value. Swire Pacific anticipates recording a disposal gain of roughly HK$22,800m from the sale of the shares. This value is referenced to the carrying value of the sale shares as of 31 May 2023, which stands at HK$7,600m.
Furthermore, this strategic move equips Swire Pacific with significant net proceeds that would drastically cut down the company’s net debt, bolster its balance sheet, and augment its financial flexibility. According to the company, this move aligns with their strategic concentration on Greater China and South East Asia. It also generates capital for funding long-term investments in their core divisions and new growth sectors, offering great potential.
Upon the completion of the sale, Swire Coca-Cola, Swire Coca-Cola USA, and JS&SL are set to sign a management services agreement. This pact will allow Swire’s beverages division to fortify its global franchise ties with The Coca-Cola Company, serving a substantial franchise population of 882 million across four countries, and create an additional revenue stream for SCCL through the management fee.
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Guy Bradley, Swire Pacific’s Chairman, speaking about the conditional sale, stated, “This deal offers an attractive valuation, leading to an unprecedented disposal gain of approximately HK$22.8 billion. This empowers us to deliver immediate value to our shareholders by returning nearly half of this gain through a special dividend. It also aligns seamlessly with our strategic focus on Greater China and South East Asia, where we’re committed to advancing our exciting investment plans.”
At present, Swire Coca-Cola, USA manufactures, sells, and distributes Coca-Cola and other beverages across 13 western U.S. states, reaching a franchise population of about 30 million. Swire Coca-Cola’s first forays into South East Asia occurred in July last year when it agreed to acquire Coca-Cola subsidiaries with bottling businesses in Vietnam and Cambodia. These transactions solidified Swire Coca-Cola’s dominant position in one of the world’s rapidly growing beverage markets.
This news is based on Marketing Interactive.
