Does Coke do everything Pepsi does?

Posted by: Aaron Pressman on April 20, 2009

Interesting move by PepsiCo (PEP) to buy the outstanding shares it didn’t already own of its two major bottlers, Pepsi Bottling Group (PBG) and PepsiAmericas (PAS). While the pundits debate whether it’s a smart move or sign of desperation, the market is already guessing that Pepsi arch rival Coca-Cola (KO) will follow suit. Shares of Coke’s biggest bottler, Coca-Cola Enterprises (CCE) shot up to $16 this morning after closing yesterday at $14.88. The rally faded a bit towards the close and the shares ended up around $15.27 — still a healthy 2.6% gain on a day when the market tanked by more than 4%.

But what are the odds Coke will buy CCE? We’ll probably know a lot more tomorrow after Coke releases first quarter earnings and chats with analysts. At least in their previous call, the company seemed to be moving in the exact opposite direction. Asked about capital expenditures on behalf of bottlers on a February 12 call, Chief Financial Officer Gary P. Fayard said:

“My expectation, as you saw in 2008, is over time we will be net sellers and as we actually sell bottlers, the CapEx will come down fairly significantly.”

John Ogg at the 24/7 Wall Street blog is already trying to break down a possible deal, noting that a transaction might be far more costly for Coke.

What do you think? Will Coke follow Pepsi?

Reader Comments

leneth

April 21, 2009 12:46 AM

definitely coke will follow pepsi as all the leaders in the world have followers!!
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leneth
Online Uk Jobs Resource

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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