They say the market does not offer any free lunches and for the most part this is true. However market inefficiencies are more common than the academics care to admit and while this Special Report update is not about a free lunch, I hope to show that there is at least a free bottle of Coke to be had in the acquisition of the North American operations of bottling company Coca-Cola Enterprises (CCE) by The Coca-Cola Company (KO). This is one of the most interesting and complex mergers I have come across since we started the Merger Arbitrage service in March. To clarify CCE is the bottling and distribution company that takes concentrate from KO, converts it into the various brands of fizzy drinks we are familiar with and sends them to retailers and other channels for sale. KO is the company that owns the brands like Coca-Cola, Fanta, Sprite, etc and sells concentrate to bottling companies like CCE.
How would you like to own a company that retires a significant portion of its outstanding stock (like a large stock buyback), increases its regular dividend by 39% (bumping the yield to approximately 3.08%), sends you $10 per share in cash and to top it all has another company take over all its debt and pension liabilities while retaining all the cash on the balance sheet? In return the company has to give up all its North American operations, retain its European operations and acquire additional European operations in Norway and Sweden. If such a company sounds interesting, then CCE should definitely be on your radar.