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Acquisitions and Divestitures
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Sep. 27, 2013
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| Acquisition and Divestitures [Text Block] |
ACQUISITIONS AND DIVESTITURES
Acquisitions
During the nine months ended September 27, 2013, our Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $326 million, which primarily included our acquisition of the majority of the remaining outstanding shares of Fresh Trading Ltd. ("innocent") and bottling operations in Myanmar. The Company previously accounted for our investment in innocent under the equity method of accounting. We remeasured our equity interest in innocent to fair value upon the close of the transaction. The resulting gain on the remeasurement was not significant to our condensed consolidated financial statements.
During the nine months ended September 28, 2012, our Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $1,148 million, which primarily included investments in the existing beverage business of Aujan Industries Company J.S.C. ("Aujan"), one of the largest independent beverage companies in the Middle East, and our acquisition of bottling operations in Vietnam, Cambodia and Guatemala.
The Company transferred $815 million during the nine months ended September 28, 2012, under its definitive agreement with Aujan in exchange for an ownership interest of 50 percent in the Aujan entity that holds the rights to Aujan-owned brands in certain territories and an ownership interest of 49 percent in Aujan's bottling and distribution operations in certain territories. The Company's investments in Aujan are being accounted for under the equity method of accounting.
Coca-Cola Erfrischungsgetränke AG
In conjunction with the Company's acquisition of 18 German bottling and distribution operations in 2007, the former owners received put options to sell their respective shares in Coca-Cola Erfrischungsgetränke AG back to the Company on January 2, 2014, with notification to the Company required by September 30, 2013. During the nine months ended September 27, 2013, the Company received notice that 100 percent of the put options would be exercised. The total exercise price for the put options is approximately $492 million.
Divestitures
During the nine months ended September 27, 2013, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $869 million. These proceeds primarily included the sale of a majority ownership interest in our previously consolidated bottling operations in the Philippines ("Philippine bottling operations"), and separately, the deconsolidation of our bottling operations in Brazil ("Brazilian bottling operations"). See below for further details on each of these transactions.
During the nine months ended September 28, 2012, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $19 million. None of the disposals were individually significant.
Philippine Bottling Operations
On December 13, 2012, the Company and Coca-Cola FEMSA, S.A.B. de C.V. ("Coca-Cola FEMSA"), an equity method investee, executed a share purchase agreement for the sale of a majority ownership interest in our consolidated Philippine bottling operations. This transaction was completed on January 25, 2013. The Company now accounts for our ownership interest in the Philippine bottling operations under the equity method of accounting. Following this transaction, we remeasured our investment in the Philippine bottling operations to fair value taking into consideration the sale price of the majority ownership interest. Coca-Cola FEMSA has an option to purchase our remaining ownership interest in the Philippine bottling operations at any time during the seven years following closing based on the initial purchase price plus a defined return. Coca-Cola FEMSA also has an option exercisable during the sixth year after closing to sell its ownership interest back to the Company at a price not to exceed the initial purchase price.
As of December 31, 2012, our Philippine bottling operations met the criteria to be classified as held for sale, and we were required to record their assets and liabilities at the lower of carrying value or fair value less any costs to sell based on the agreed-upon sale price. The Company recorded a total loss of $107 million, primarily during the fourth quarter of 2012, on the sale of our Philippine bottling operations. Refer to the table below for details of our Philippine bottling assets and liabilities that were classified as held for sale.
Brazilian Bottling Operations
On December 17, 2012, the Company entered into an agreement with several parties to combine our Brazilian bottling operations with an independent bottler in Brazil in a transaction involving a disposition of shares for cash and an exchange of shares for a 44 percent minority ownership interest in the newly combined entity which was recorded at fair value. This transaction was completed on July 3, 2013, and resulted in the deconsolidation of our Brazilian bottling operations. The Company recognized a gain of $615 million as a result of this transaction. The owners of the majority interest have the option to acquire from us up to 24 percent of the new entity's outstanding shares at any time for a period of six years beginning December 31, 2013.
As of December 31, 2012, our Brazilian bottling operations met the criteria to be classified as held for sale, but we were not required to record their assets and liabilities at fair value less any costs to sell because their fair value exceeded our carrying value. Refer to the table below for details of our Brazilian bottling assets and liabilities that were classified as held for sale.
Assets and Liabilities Held for Sale
The following table presents information related to the major classes of assets and liabilities that were classified as held for sale in our condensed consolidated balance sheet as of December 31, 2012 (in millions):
We determined that our Philippine and Brazilian bottling operations did not meet the criteria to be classified as discontinued operations, primarily due to the continued significant involvement we have in these operations following each transaction.
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