Coca Cola 2008 Annual Report Download - page 138

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20: ACQUISITIONS AND INVESTMENTS (Continued)
combined purchase price for these third-quarter acquisitions was approximately $203 million. NORSA is
included in the Bottling Investments operating segment.
On June 7, 2007, in an effort to expand our still beverage offerings, our Company acquired Energy
Brands Inc., also known as glac´ eau, the maker of enhanced water brands, such as vitaminwater and smartwater,
for approximately $4.1 billion. On the acquisition date, we made a cash payment of approximately $2.9 billion
for a 71.4 percent interest in glac´ eau and entered into a put and call option agreement with certain entities
associated with the Tata Group (‘‘Tata’’) to acquire the remaining 28.6 percent ownership interest in glac´ eau. As
a result of the terms of these agreements with Tata, the amount to be paid under the put and call option
agreement of $1.2 billion was recorded at the acquisition date as an additional investment in glac´ eau, with the
offset being recorded as a current liability within loans and notes payable on the consolidated balance sheets. On
October 22, 2007, the Company exercised its right to call the remaining interest in glac´ eau and paid Tata
$1.2 billion, such that the Company owned 100 percent of glac´ eau as of December 31, 2007. Under the purchase
method of accounting, the total purchase price of glac´ eau 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 allocation was
approximately $3.3 billion to trademarks, approximately $2.0 billion to goodwill, approximately $0.1 billion to
customer relationships and approximately $1.1 billion to deferred tax liabilities. The trademarks have been
assigned indefinite lives. The goodwill resulting from this acquisition is primarily related to our ability to
optimize the route to market and increase the availability of the product, which will result in additional product
sales. The goodwill also includes the recognition of deferred tax liabilities associated with the identifiable
intangible assets recorded in purchase accounting. The goodwill is not deductible for tax purposes. On
August 30, 2007, the Company announced its plans to transition to a new distribution model for glac´ eau
products. This new distribution model includes a mix of legacy glac´ eau distributors and existing Coca-Cola
system bottlers. Also, the Company will retain the distribution rights for certain channels. The implementation
of this plan resulted in approximately $0.2 billion in liabilities for anticipated costs to terminate existing glac´ eau
distribution agreements, which was reflected as an adjustment to the original allocation of acquisition costs.
Substantially all of these termination costs were paid by the end of 2008. The acquisition of glac´ eau was
accounted for as a business combination, with the results of the acquired entity included in the North America
operating segment as of the acquisition date.
In addition, certain executive officers and former shareholders of glac´ eau invested approximately
$179 million of their proceeds from the sale of glac´ eau in common stock of the Company at then-current market
prices. These shares of Company common stock were placed in escrow pursuant to the glac´ eau acquisition
agreement.
As discussed below, in the second quarter of 2007, the Company divested a portion of its interest in Scarlet
Ibis Investment 3 (Proprietary) Limited (‘‘Scarlet’’), a bottling company in South Africa.
During the first quarter of 2007, our Company acquired the remaining 65 percent interest in CCBPI from
San Miguel Corporation (‘‘SMC’’) for consideration of approximately $591 million plus assumed net debt, of
which $100 million was placed in escrow until certain matters related to the closing balance sheet audit of
CCBPI were resolved. During the third quarter of 2007, the entire escrow amount was released, and our
Company recovered $70 million. The adjusted purchase price after the recovery from escrow was approximately
$521 million plus assumed debt, net of acquired cash, of approximately $79 million. Of the $521 million of
consideration, the Company has outstanding notes payable to SMC of approximately $100 million as of
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