Swire Pacific sells US Coke business to parent for US$3.9b

Swire Pacific (0019, 0087) said it has agreed to sell the US Coca-Cola business for US$3.9 billion (HK$30.4 billion) to its controlling shareholder John Swire & Sons and would propose a special dividend of HK$11.7 billion upon completion of the deal.

The Hong Kong-based conglomerate, which Swire Pacific, which owns a 45 percent stake in the SAR's flagship carrier Cathay Pacific Airways (0293), expects a consolidated gain of around HK$22.8 billion from the sale and intends to distribute about half of it - HK$8.120 per 'A' share and HK$1.624 per 'B' share - to shareholders.

The remainder would be applied toward potential investment opportunities in its core regions and general working capital requirements, it said.

The target company sells and distributes Coca-Cola and other beverages in 13 states across the western US, including California and Washington, with a franchise population of approximately 30 million.

Swire's beverages unit Swire Coca-Cola will provide management and administrative support services to the target company in the US for an annual management fee of HK$117 million plus a mark-up of 5 percent, or no less than 6 percent of the US business' recurring earnings before interest and tax after the disposal, whichever is higher, the filing showed.

Swire said the management services agreement will enable the beverages division to continue to strengthen its global franchise relationship with Coca-Cola while providing an additional fee income stream.

The firm believes the disposal enables it to crystallize the value of the US business at an"attractive valuation significantly above its book value," materially reduce its net debt, further strengthen its balance sheet, and enhance its financial flexibility.

The transaction is consistent with its strategic focus on Greater China and South East Asia, Swire added.

Its property arm Swire Properties (1972), meanwhile, said it had sold more than 290 car parking spaces in Tai Koo Shing in a week.