Corporate News

Coca-Cola bottlers in CEO search after Kenyan merger

A Coca-Cola depot. Three bottlers have merged to create a single company that will be soon be having new directors and executive. Photo/Salaton Njau
A Coca-Cola depot. Three bottlers have merged to create a single company that will be soon be having new directors and executive. Photo/Salaton Njau  Nation Media Group

Three Coca-Cola bottlers are set to begin the search for a new executive and directors after the completion of their merger, which has seen Centum become one of top shareholders.

The bottling factories based in Nyeri, Rift Valley and Kisii will now form a single entity— the Almasi Beverages Limited —with the value of the three expected to rise by 26 per cent to Sh5.7 billion.

Peter Njonjo, Coca-Cola general manager for East Africa, said the merger that was announced in August is now complete, setting the stage for a new board and management to take over the joint operation.

The three bottlers have been operating as distinct companies with their own managers, boards of directors and shareholders including investment firm Centum that had 44 per cent stake in Rift Valley, Mount Kenya (28.6 per cent) and 23.8 per cent in Kisii as at March.

Centum has emerged a key beneficiary of the merger with a director in the firm putting its stake at about 40 per cent, an ownership that will offer muscle in the search of new directors and executives.

This was reinforced by the fact that Coca-Cola’s East Africa office, advisers of the deal Dalberg Global Development and the bottlers directed the Business Daily to Centum for the finer details of the transaction.

‘‘Centum’s stake in Almasi is just under 40 per cent,’’ said Robert Bunyi, a director of the Nairobi bourse-listed investment firm. The merger would not entail closure of plants, the officials said.

Nairobi Bottlers which was created from Nakuru-based Flamingo Bottlers, Machakos-based East Kenya Bottlers and the old Nairobi Bottlers seven years ago, led to the shut down of the three factories and job cuts.

“Almasi will soon start the process of appointing its board of directors and top management,” said a source familiar with the plans who sought anonymity.

Shareholders of the bottling plants were issued with new shares following a swap, which saw Centum emerge the top shareholder on the strength that it had ownership in all the three firms.

The merger of the three bottling factories comes amid resistance from some shareholders including businessman Matu Wamae, a shareholder in the Mount Kenya factory.

Mr Wamae claimed the transaction was spearheaded by Centum and Industrial & Commercial Development Corporation (ICDC), which also has stakes in the companies.

The deal happened in a period that saw Centum tighten its grip on the Coca-Cola franchises after the investment firm bought additional shares in four bottling companies Nairobi Bottlers worth Sh442m between April and September.

It has a 27.62 per cent stake in Nairobi Bottlers — which it says accounts for half of Coca-Cola branded sodas sold in the Kenyan market. Centum’s shares in the four Coca- Cola bottling companies represented 28 per cent of its assets, contributed 20 per cent of its profit and two per cent of the cash flow in the year to March.

Almasi is expected to lead to operational cost savings and a larger market share in the soft drinks market besides offering an opportunity for producing new products such as ready-to-drink coffee and tea, according to promoters of the offer.

The merged unit will become the second largest in market share among the Coca-Cola bottlers in Kenya with 29 per cent, behind Nairobi Bottlers which controls 48 per cent of the market.

Coast Bottlers has 11 per cent market share, Equator 12 per cent, Kisii nine per cent while Rift Valley and Mt Kenya control 10 per cent each.

The merger comes amid a court case involving the three bottling firms and Nairobi Bottlers that Centum has warned might hurt its earnings if their petition fails at the Court of Appeal.

The companies are required to pay Kenya Revenue Authority Sh5.6 billion in taxes after ignoring a review of taxation laws that required soft drink makers to pay excise duty on costs incurred during cleaning of returned bottles.

The four franchises moved to court in May last year to oppose the KRA demand, but they lost the court battle on October 29 and plan to appeal and have obtained orders maintaining the status quo.

Soft drinks production in the half year to June dropped for the first time in four years from 189.7 million litres to 187.9 million in a similar half last year. Coca-Cola blamed the drop on the high cost of living.

The beverage giant is also faced with new competition after top rivals Pepsi Cola recently switched on its Sh2.4 billion Kenyan plant.

PepsiCo exited the Kenyan market in the 1970s for strategic reasons and made a re-entry in 2010, but has been relying on imports of its brands such as Pepsi Cola, Pepsi Diet, Mirinda, Evervess Soda Water and Seven Up.

vjuma@ke.nationmedia.com