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COCA COLA CO 8-K Report, Material Agreement (May 31, 2007)

Filed May 31, 2007For Securities:KO

Summary

The Coca-Cola Company (TCCC) announced a significant acquisition via an 8-K filing on May 31, 2007, detailing the entry into an Agreement and Plan of Merger with Energy Brands Inc. d/b/a Glaceau. This transaction involves TCCC acquiring Glaceau for a substantial cash consideration of $4,230,000,000, adjusted for certain expenses and cash balances. This acquisition marks a major strategic move by Coca-Cola to expand its beverage portfolio, particularly in the growing market for enhanced and non-carbonated drinks. The filing also outlines complex arrangements with Glaceau's existing stakeholders, including a roll-over option for entities affiliated with The Tata Group, allowing them to retain a minority stake in the surviving entity, subject to put and call options controlled by TCCC. Furthermore, key Glaceau executives are set to invest approximately $180 million in TCCC stock, aligning their interests with the acquiring company. The report details the structure of indemnification and escrow arrangements to mitigate risks associated with the transaction.

Key Highlights

  • 1The Coca-Cola Company (TCCC) is acquiring Glaceau (Energy Brands Inc.) for $4.23 billion in cash.
  • 2The acquisition is structured as a merger where Glaceau will become a subsidiary of TCCC.
  • 3A significant portion of the deal involves cash payment, with adjustments for Glaceau's transaction expenses and cash on hand.
  • 4The Tata Group, a Glaceau stakeholder, will have the option to roll over its investment into the surviving entity, with TCCC holding call and put options to eventually gain full ownership.
  • 5Key Glaceau executives will invest approximately $180 million in TCCC stock.
  • 6The transaction includes customary representations, warranties, covenants, and conditions, including Hart-Scott-Rodino Act approval.
  • 7Escrow arrangements and supplemental indemnity agreements are in place to cover potential claims arising from the merger.

Frequently Asked Questions

This 8-K filing announces and provides details regarding The Coca-Cola Company's (TCCC) entry into a material definitive agreement to acquire Energy Brands Inc. d/b/a Glaceau for $4.23 billion. It outlines the terms of the merger, payment structure, and associated agreements with Glaceau's stakeholders.

Glaceau is known for its brands like Vitaminwater, Smartwater, and Powerade. Acquiring Glaceau would significantly expand Coca-Cola's presence in the rapidly growing market for enhanced water and non-carbonated beverages, complementing its existing portfolio and diversifying its revenue streams beyond traditional soft drinks.

Key Glaceau executives are set to invest approximately $180 million in TCCC stock. The Tata Group, a Glaceau shareholder, has the option to exchange its shares for a minority stake in the surviving entity post-merger, with TCCC holding call and put options that would eventually allow TCCC to acquire 100% ownership of the merged entity.

The Merger Agreement includes customary representations and warranties. Additionally, 10% of the merger consideration will be held in escrow to satisfy potential indemnification claims. J. Darius Bikoff, a Glaceau representative, has also entered into a Supplemental Indemnity Agreement to personally guarantee certain representations and warranties, particularly in cases of alleged fraud.