Bhartia Brothers seek US$1.5B to acquire 40% stake in Hindustan Coca-Cola Beverages
INDIA – Shyam and Hari Bhartia, promoters of the Jubilant Bhartia Group, are seeking to raise up to Rs 12,500 crore (US$1.5 billion) to acquire a 40 percent stake in Hindustan Coca-Cola Beverages (HCCB), Coca-Cola’s Indian bottling subsidiary.
This acquisition would be the largest investment by the Bhartia Group, which has diverse business interests spanning from food to pharmaceuticals.
The funding discussions, according to a report by The Economic Times, involve prominent firms such as Apollo Global Management, Ares Management, Bain Capital, and Kotak Alternate Asset Managers.
The Bhartia brothers are aiming to raise Rs 4,000 (US$475.7M) to Rs 5,000 crore (US$594.7M) through a structured instrument, likely in the form of compulsorily convertible preference shares or convertible debentures, with a tenure of three years and a minimum return guarantee.
Coca-Cola’s plans to list HCCB in the future, following the asset-light model previously adopted by PepsiCo, are a key driver behind this potential deal.
The stake sale could assist in price discovery ahead of a possible IPO for HCCB, which is anticipated to occur in the coming years.
If treated as a quasi-equity instrument, the financial terms of the deal may exclude a coupon, which is a common feature in traditional debt transactions.
Additionally, the deal is not expected to involve any security linked to the shares of Jubilant FoodWorks, one of the Bhartia Group’s publicly traded companies.
The Bhartia family was chosen by Coca-Cola for this collaboration, surpassing a rival bid from the Burman family, promoters of Dabur. Coca-Cola and the Bhartia family have signed an exclusivity agreement to continue bilateral negotiations.
At the same time, discussions are ongoing to secure additional debt from mutual funds for a period of three to five years.
Morgan Stanley, acting exclusively for the Bhartia family, is leading these efforts. The strategy involves setting up a special purpose vehicle (SPV) to hold the 40 percent equity stake in HCCB.
India is Coca-Cola’s fifth-largest global market, with the beverage giant optimistic about its continued growth. The company expects organic revenue growth of 6-7% in 2024.
Earlier this year, HCCB refranchised operations in several Indian states, transferring control to local business partners as part of efforts to streamline its operations.
In the first quarter of 2024, HCCB reported net gains of US$599 million and US$293 million from refranchising its bottling operations in the Philippines and India, respectively.
Sign up to receive our email newsletters with the latest news updates and insights from Africa and the World HERE
