Small grocers will watch Lion Nathan’s Coca-Cola bid carefully

Coca-Cola Amatil’s rejection of Lion Nathan’s $7.7 billion takeover bid has been met with relief by independent grocers, who are worried about the market dominance that the merged entity would hold.

Coca-Cola Amatil’s rejection of Lion Nathan’s $7.7 billion takeover bid has been met with relief by independent grocers, who are worried about the market dominance that the merged entity would hold.

CCA has declared it is no longer considering the proposal, partly because of lack of support from The Coca-Cola Company, which owns 30% of CCA.

The proposal would have created a $12 billion group, which would include some of the bigger beverage brands, such as Lion-owned Tooheys, XXXX, West End and Hahn. CCA owns Coca-Cola, Sprite, Fanta and Mount Franklin.

While Lion says the bid would generate savings of up to $130 million, CCA argues several conditions for the bid have been unsatisfied and the price offered is lower than other international bids.

“The CCA board has reviewed its position and believes that there are a number of material deficiencies in the proposal, which is subject to a range of material conditions precedent,” a statement from the group says.

“The CCA board can give no assurance that the proposal will proceed or will be supported by the CCA board or its major supplier, The Coca-Cola Company.”

Ken Henrick, National Association of Retail Grocers of Australia chief executive, is relieved by the bid’s rejection. He says any merger between such large brands needs to be watched carefully.

“I don’t know if it will have any impact on grocers, just competitors in the market. But Coca-Cola is a very dominant player in its market and I think that any merger would need to be looked at by the ACCC.

“Concentration in any market is not good. Coke is very, very dominant, so if this is going to make them even more so then some people obviously would have concerns.”

This morning Lion announced a 3.3% decline in net annual profit for the 2008 fiscal year. The group’s annual figures show a decline to a $272.7 million profit for 2007-08, due to one-off item costs such as the acquisition of brewer J Boag & Son.

The company says that while economic conditions are volatile at present, net profit in 2009 should come in around $300 million to $315 million.

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• Lion Nathan launches bid for Coca-Cola Amatil to create $11 billion giant