Coca-Cola buying stake in Saudi drink company
DUBAI (Reuters) - Coca-Cola Co (KO.N) is buying a stake in Saudi Arabia-based beverage company Aujan Industries for $980 million in what is seen as a bid to catch up with rival PepsiCo Inc (PEP.N) in the Middle East.
Coke and Aujan on Wednesday said the deal would be the largest-ever investment by a multinational company in the Middle East's consumer goods sector. The transaction is slated to close in the first half of 2012.
While Coke dominates the global beverage business, Pepsi is the leader in the Middle East, Beverage Digest editor and publisher John Sicher told Reuters.
"This deal begins to give Coke more critical mass in these countries where Pepsi dominates and should, over time, enhance Coke's presence in those markets," Sicher said.
Under the agreement, Coca-Cola will acquire a 50 percent stake in the entity that holds the rights to Aujan's brands and a 49 percent stake in Aujan's bottling and distribution company.
Aujan brands include Rani, a line of juices, and Barbican, a flavored malt beverage.
"The Middle East is a high-growth region" with some of the highest rates of nonalcoholic drink consumption per capita, Ahmet Bozer, Coca-Cola's president for Eurasia and Africa, said in a statement.
The Middle East currently contributes a small fraction of Coke's overall sales. The company in October announced plans to invest $5 billion in the Middle East and North Africa over the next 10 years.
Aujan Chairman Adel Aujan told Arabiya television in an interview that he hoped to double revenue in five years, from the current 3 billion riyals ($800 million) annually.
"Sixty-five percent of our sales are outside the kingdom (of Saudi Arabia) and we compete with international companies, so as time goes by I see that these giant international companies -- we don't have their capabilities," Aujan said.
The agreement excludes Aujan's Iranian manufacturing and distribution business, the companies said.
Coke gets a significant portion of its sales from outside the United States and has been buoyed by its presence in emerging markets, where workers with rising incomes are supporting more beverage sales.
Shares of Coca-Cola were down 16 cents at $66.42 in afternoon trading on the New York Stock Exchange.