Coca Cola 2008 Annual Report Download - page 137

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THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20: ACQUISITIONS AND INVESTMENTS (Continued)
In the fourth quarter of 2007, the Company and Coca-Cola FEMSA jointly acquired Jugos del Valle, the
second largest producer of packaged juices, nectars and fruit-flavored beverages in Mexico and the largest
producer of such beverages in Brazil. The purchase price was approximately $370 million plus the assumption of
approximately $85 million in debt and was split equally between the Company and Coca-Cola FEMSA. As of
December 31, 2008, the Company owned a 50 percent interest in Jugos del Valle. The Company’s investment in
Jugos del Valle is accounted for under the equity method. Equity income (loss)—net includes our proportionate
share of the results of Jugos del Valle’s operations beginning November 2007 and is included in the Latin
America operating segment.
In order to increase the efficiency of our bottling and distribution operations in the German market, the
Company, through its consolidated German bottling operation Coca-Cola Erfrischungsgetraenke AG
(‘‘CCEAG’’), acquired 18 German bottling and distribution operations on September 1, 2007, for a total
purchase price of approximately $547 million plus transaction costs. Following the acquisition, the Company
owns the franchise rights for all of the German market. The purchase price consisted of approximately
17 percent of the outstanding shares of CCEAG valued at approximately $384 million, approximately
$151 million in cash and assumed net debt of approximately $12 million. The acquisition agreements also
provide the former owners of the 18 German bottling and distribution operations a put option to sell their
respective shares in CCEAG back to the Company on January 2, 2014, with notification to the Company
required by September 30, 2013. In addition, the agreements provide the Company with a call option to
repurchase the issued shares of CCEAG back from the former owners of the 18 German bottling and
distribution operations on January 2, 2014, with notification to the former owners of the 18 German bottlers and
distributors by December 15, 2013. The strike price of the call option is approximately 20 percent higher than
the strike price of the put option. As of the closing date of this transaction, the present value of the amounts
likely to be paid under the put and call agreements and guaranteed future cash payments was approximately
$384 million. Under the purchase method of accounting, the total purchase price is allocated to the tangible
assets, liabilities and identifiable intangible assets acquired based on their estimated fair values. Any excess of
purchase price over the aggregate fair value of acquired net assets is recorded as goodwill. The final purchase
price allocated to franchise rights was approximately $345 million; property, plant and equipment was
approximately $227 million; deferred tax liabilities was approximately $97 million; and goodwill was
approximately $153 million. Approximately $33 million of the goodwill is deductible for tax purposes. The
franchise rights have been assigned an indefinite life. In conjunction with this acquisition, management
formulated a plan to improve the efficiency of the German bottling and distribution operations. The
implementation of this plan resulted in approximately $45 million in liabilities for anticipated costs related to
production and distribution facility closings. As of December 31, 2008, the Company has implemented a
majority of its plan, and expects the final implementation steps to be completed by the end of the first quarter of
2009. This transaction was accounted for as a business combination, with the results of the 18 German bottling
and distribution operations included in the Bottling Investments operating segment since September 1, 2007.
In the third quarter of 2007, the Company acquired a 34 percent interest in Tokyo CCBC. The Company’s
investment in Tokyo CCBC is accounted for under the equity method. Equity income (loss)—net includes our
proportionate share of the results of Tokyo CCBC’s operations beginning July 2007 and is included in the
Bottling Investments operating segment. In the third quarter of 2007, the Company also acquired an additional
11 percent interest in NORSA. After this acquisition, the Company owned approximately 60 percent of NORSA.
The Company began consolidating this entity from the date we acquired the additional 11 percent interest. The
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