Four major shareholders may block the Coca-Cola Amatil takeover by Coca-Cola European Partners (CCEP), saying the $12.75 a share bid is too low.

Dublin-based Setanta Asset Management said CCEP’s offer, valued at the around $9.3 materially undervalued the business. It wants Amatil to engage with CCEP to secure a better price. 

“The offer from CCEP fails to take into account the successful transformation program that is already underway in [Amatil’s] Australian beverages division, in addition to the strength of the business in New Zealand and growth potential in Indonesia,” said Fergal Sarsfield, Setanta senior portfolio manager.

“Amatil’s management team have worked tirelessly to develop the company and the offer of $12.75 per share does not reflect the strength and value of the business.”

Martin Currie Australia, Antares Capital and Pendal Group are also unhappy with the Amatil takeover offer.

Together they account for about 9-10% of Amatil’s shares, or 13-14% of the shares not owned by The Coca-Cola Company.

Some Amatil shareholders believe the offer should be pitched closer to $14 a share.

 Crispin Murray, head of equities at Pendal Group told The Australian Financial Review: “We don’t feel like this is an offer that is compelling and we don’t see a lot of downside if the deal fell over.”

Amatil takeover leads push into Asia

CCEP believes the Amatil takeover could provide a stepping stone into new Asian markets.

CCEP chief executive Damian Gammell, who ran Amatil’s non-carbonated drinks business more than 15 years ago, said the deal would “provide the opportunity to take on one of the world’s most populous emerging markets in Indonesia”.

Gammell said Amatil would look to buy Coca-Cola territories owned by other bottlers in the region.

“That’s probably the next step beyond this transaction,” Gammell said.

Gammell believed there was scope to lift consumption levels across all Amatil markets, “given they are currently significantly lower than in our markets”, and said the company was keen to retain, rather than divest, Amatil’s coffee and alcoholic beverage businesses.

CCEP eyes Amatil’s alcohol expertise

CCEP recently introduced Top Chico Hard Seltzer in Europe and Beverage Daily speculates that it “plans to take Amatil’s expertise in alcohol and apply it to the European market”.

“While the core category for both businesses is non-alcoholic ready-to-drink, the transaction would methodically strengthen and broaden our current portfolio, not just within that category, but in the acquisition of wider capabilities in alcohol and coffee.

“If you look at the size and the scope of Amatil’s alcohol business, we believe there’s a lot of learning there. That’s one of the beauties of this deal.”

In a trading update last month, Amatil said its results improved in the September quarter, down 4.2% year on year, an improvement on the 1H20 decline of 9.2%.

In Alcohol, spirits were up 23.1% in 3Q20 driven by the Jim Beam trademark and continued strong at-home consumption. Beer and Cider in 3Q20 were up 2.8% year on year, with strong performance by Feral in Western Australia.

Amatil said it was “well placed to capitalise on the all-important 4Q20 Christmas trading period”.