Swire Pacific agrees conditional sale of US soft drinks business to UK parent firm for US$3.9 billion

Should independent shareholders approve the sale, about half of the gain or HK$11.7 billion, would be distributed to shareholders via dividends
Deal proceeds will be used to reduce net debt as firm keeps its strategic focus on Greater China and Southeast Asia

Mergers & Acquisitions

Cheryl Arcibal

Published: 9:00pm, 28 Jun 2023

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Swire Pacific has agreed the conditional sale of its entire soft drinks business in the US for US$3.9 billion to its UK-headquartered parent company, allowing it to realise a “record gain” of HK$22.8 billion (US$2.91 billion) and focus on the Greater China and Southeast Asia region.

The sale of Swire Coca-Cola, USA to JS&S (Beverages), a unit of John Swire & Sons Limited, Swire Pacific’s parent firm, is conditional on the approval of Swire Pacific’s independent shareholders, according to a statement issued to the Hong Kong stock exchange on Wednesday.

Should independent shareholders approve the sale, about half of the gain or HK$11.7 billion, would be distributed to shareholders via a dividend of HK$8.12 per A share and HK$1.624 per B share. This “would be larger than the sum of dividends paid over the last three financial years,” according to the filing.

“The significant net proceeds from the transaction will serve to materially reduce the company’s net debt, further strengthen its balance sheet and enhance its financial flexibility,” according to the filing.

At the end of last year, Swire Pacific’s net debt amounted to HK$56.8 billion, an increase of about 47 per cent from the end of 2021. On Wednesday, Swire Pacific’s shares closed 3.67 per cent higher at HK$57.85.

Swire Pacific Limited’s Chairman, Guy Bradley. Photo: SCMP / Jonathan Wong

Swire Coca-Cola, USA distributes Coca-Cola and other beverages in 13 states across the Western US, including Arizona, California, Colorado, Idaho, Kansas, Nebraska, Nevada, New Mexico, Oregon, South Dakota, Utah, Washington and Wyoming, serving about 30 million consumers.

“This transaction represents an attractive valuation that results in a gain of around HK$22.8 billion on disposal, the biggest profit ever realised by Swire Pacific,” said Guy Bradley, Swire Pacific chairman.

“This allows us to provide immediate value to our shareholders by returning around half of this gain by way of a special dividend. It is also consistent with our strategic focus on Greater China and Southeast Asia, where we remain committed to executing our exciting investment pipeline.”

The deal’s value was about 12.4 times the unit’s earnings before interest, taxes, depreciation and amortisation of about HK$2.46 billion in 2022.

In July, Swire Pacific bought Coca-Cola’s bottling operations in Vietnam and Cambodia for US$1.015 billion in cash.

In Asia, Swire Coca-Cola also manufactures and sells Coca-Cola products in 11 provinces and the Shanghai municipality in mainland China. It also serves Hong Kong and Taiwan.

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