Coca-Cola Hellenic Bottling SA, (EEEK) the world’s second-largest Coca-Cola bottler, plans to move its main stock listing from Athens to London as Greece’s largest company by market value flees the epicenter of Europe’s debt crisis.
The move will make it eligible for inclusion in the benchmark FTSE 100 Index. A new company established in Switzerland by one of the bottler’s main shareholders will make a share-exchange offer for Coca-Cola Hellenic and seek a primary listing in London, according to an Athens bourse filing today. Coca-Cola HBC AG will also seek to list in New York.
The move comes as European officials try to convince investors that Greece’s future belongs in the euro region three years after the country’s debt crisis broke out. While German Chancellor Angela Merkel visited Athens to assure Greek citizens she wants them to stay in the euro, the largest opposition party says Greece should renege on all its bailout agreements and a report today showed unemployment rose above 25 percent in July.
“The move will help disassociate CCH from problems related to Greece” including a potential exit from the euro area and related capital controls, said Paris Mantzavras, an analyst at Pantelakis Securities in Athens.
Coca-Cola HBC operates in 28 countries across three continents and employs more than 40,000 people, generating sales last year of 6.9 billion euros ($8.9 billion). Ninety-five percent of its business and shareholders are outside Greece.
Switzerland was chosen as the location for the new company because of its stable economy and regulatory environment and the ease of doing business there, according to the statement. The country is among the existing markets of the business.
Trading in London “will give us greater recognition among international investors, will increase the liquidity of our stock and improve our access to the international equity and debt markets,” Dimitris Lois, Coca-Cola HBC’s chief executive officer, told reporters on a conference call today.
A London listing may allow for the inclusion of the shares in the FTSE 100, according to the statement. Coca-Cola HBC’s market value is equivalent to about 4.6 billion pounds ($7.4 billion), which the company said would make it the 69th-biggest stock in the index.
“A potential FTSE Index inclusion will allow index tracker funds to add our stock to their portfolio, leading to higher volumes and liquidity,” Lois said. “We are an international business and should reside on an international exchange.”
Coca-Cola HBC shares fell 4.9 percent to 15.66 euros at the close of trading in Athens. At current prices, the company is valued above companies in the FTSE 100 Index including InterContinental Hotels Group Plc (IHG) and Severn Trent Plc.
“If someone doesn’t want to enter the new body, the best option is probably to sell the share at the current price of about 16 euros,” said Yiannis Sinapis, an analyst at Athens- based Euroxx Securities. The alternative is to wait for a “squeeze-out” where they will get 13.58 euros in cash per share or have to accept the one-for-one exchange, Sinapis said.
Coca-Cola HBC SA has secured a loan if needed of 550 million euros to cover any squeeze-out costs, Lois told investors in a conference call today. “We are confident of achieving an acceptance rate of over 90 percent and the rate is currently over 61 percent.”
Greek Mutual Funds
“Greek mutual funds that invest exclusively in the local market will reduce their positions in order to account for the delisting,” George Doukas, an analyst at Piraeus Securities SA wrote in a note to clients today. “Hence, we would expect pressure on the shares in the short-term.”
The possibility of a London listing was mooted in a note published last month by Jefferies International Ltd., which gave Coca-Cola HBC a written opinion stating that the share exchange is “fair from a financial point of view” to investors.
The transaction is not expected to affect Coca-Cola HBC’s dividend policy and the company said today it remains committed to Greece, where it will maintain production and distribution of its products as well as the corporate service center that supports operations in all of its 28 markets.
Kar-Tess Holding, which holds a 23.5 percent stake in Coca- Cola Hellenic Bottling, said today that Coca-Cola HBC AG will offer one share for each share in the Athens-based company. Coca-Cola Co. (KO:US) and other long-term shareholders who together own a 37.2 percent stake have committed their shares to the offer.
Coca-Cola HBC AG is being advised by Credit Suisse Group.
Lois said he expects the London listing to be completed at the beginning of 2013.
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