Coca Cola 2011 Annual Report Download - page 93

During 2011, the Company also acquired the remaining ownership interest of Honest Tea not already owned by the Company.
Prior to the Company acquiring the remaining ownership interest of Honest Tea, we accounted for our investment under the
equity method of accounting. We remeasured our equity interest in Honest Tea to fair value upon the close of the transaction.
The resulting gain on the remeasurement was not significant to our consolidated financial statements. The Company finalized our
purchase accounting for Honest Tea during the fourth quarter of 2011.
In December 2011, the Company acquired an additional minority interest in Central Japan. As a result, the Company began to
account for our investment in Central Japan under the equity method of accounting beginning in December 2011.
During 2010, cash payments related to the Company’s acquisition and investment activities totaled $2,511 million. These payments
were primarily related to the Company’s acquisition of CCE’s North American business and the acquisition of certain distribution
rights from Dr Pepper Snapple Group, Inc. (‘‘DPS’’). See the relevant sections below for further discussion of these transactions.
In addition to the transactions listed in the preceding paragraph, our acquisition and investment activities during 2010 also
included the acquisition of OAO Nidan Juices (‘‘Nidan’’), a Russian juice company, and an additional investment in Fresh
Trading Ltd. (‘‘innocent’’). Total consideration for the Nidan acquisition was approximately $276 million, which was primarily
allocated to property, plant and equipment, identifiable intangible assets and goodwill. The Company finalized our purchase
accounting for Nidan in the third quarter of 2011. Under the terms of the agreement for our additional investment in innocent,
innocent’s founders retain operational control of the business, and we will continue to account for our investment under the
equity method of accounting. Additionally, we have a series of outstanding put and call options with the existing shareowners of
innocent for the Company to potentially acquire the remaining shares not already owned by the Company. The put and call
options are exercisable in stages between 2013 and 2014.
During 2009, cash payments related to the Company’s acquisition and investment activities totaled $300 million. None of the
acquisitions or investments was individually significant. Included in these investment activities was the acquisition of a minority
interest in innocent.
Acquisition of Coca-Cola Enterprises Inc.’s North American Business
Pursuant to the terms of the business separation and merger agreement entered into on February 25, 2010, as amended (the
‘‘merger agreement’’), on October 2, 2010 (the ‘‘acquisition date’’), we acquired CCE’s North American business. We believe this
acquisition will result in an evolved franchise system that will enable us to better serve the unique needs of the North American
market. The creation of a unified operating system will strategically position us to better market and distribute our nonalcoholic
beverage brands in North America. Refer to Note 18 for information related to the Company’s integration initiative associated
with this acquisition.
Under the terms of the merger agreement, the Company acquired the 67 percent of CCE’s North American business that was not
already owned by the Company for consideration that included: (1) the Company’s 33 percent indirect ownership interest in
CCE’s European operations; (2) cash consideration; and (3) replacement awards issued to certain current and former employees
of CCE’s North American and corporate operations. At closing, CCE shareowners other than the Company exchanged their CCE
common stock for common stock in a new entity, which was renamed Coca-Cola Enterprises, Inc. (which is referred to herein as
‘‘New CCE’’) and which continues to hold the European operations held by CCE prior to the acquisition. At closing, New CCE
became 100 percent owned by shareowners that held shares of common stock of CCE immediately prior to the closing, other than
the Company. As a result of this transaction, the Company does not own any interest in New CCE.
As of October 1, 2010, our Company owned 33 percent of the outstanding common stock of CCE. Based on the closing price of
CCE’s common stock on the last day of trading prior to the acquisition date, the fair value of our investment in CCE was
$5,373 million, which reflected the fair value of our ownership in both CCE’s North American business and European operations.
We remeasured our equity interest in CCE to fair value upon the close of the transaction. As a result, we recognized a gain of
$4,978 million, which was classified in the line item other income (loss) — net in our consolidated statement of income. The gain
included a $137 million reclassification adjustment related to foreign currency translation gains recognized upon the disposal of
our indirect investment in CCE’s European operations. The Company relinquished its indirect ownership interest in CCE’s
European operations to New CCE as part of the consideration to acquire the 67 percent of CCE’s North American business that
was not already owned by the Company.
Although the CCE transaction was structured to be primarily cashless, under the terms of the merger agreement, we agreed to
assume $8.9 billion of CCE debt. In the event the actual CCE debt on the acquisition date was less than the agreed amount, we
agreed to make a cash payment to New CCE for the difference. As of the acquisition date, the debt assumed by the Company was
$7.9 billion. The total cash consideration paid to New CCE as part of the transaction was $1.4 billion, which included $1.0 billion
related to the debt shortfall. In addition, the cash consideration paid to New CCE included amounts related to working capital
adjustments which were finalized in 2011.
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