Coca-Cola close to Glaceau buy

The Coca-Cola Company has filed a premerger notification with the US regulators regarding the proposed acquisition of vitamin water maker Glaceau, industry publication Beverage Digest reported on Monday.

The report saw the shares of Tata Tea surging by 4.4 per cent on a day when the BSE Sensex rose by 0.24 per cent. The Tata group, including holding company Tata Sons and Tata Tea, holds a 30 per cent stake in Glaceau.

After opening at Rs 848.75, Tata Tea rose to Rs 877.55 on the Bombay Stock Exchange, gaining 4.43 per cent over yesterday's closing price of Rs 840.30. Based on the price of the Tata group's acquisition, New York-based Glaceau could be valued at close to $2.25 billion.

However, the market estimates that Coca-Cola will have to shell out anywhere between $3 billion and $4 billion for the stake in Glaceau. Beverage Digest said the world's largest beverage company, Coca-Cola, had filed a Hart-Scott-Rodino Act notification with the US Federal Trade Commission.

The notification is required for proposed deals of significant sizes so that the FTC and Department of Justice can assess whether the deals are likely to reduce competition in the marketplace.

A Coca-Cola spokesman declined to comment. The spokespersons of Tata Tea and Tata Sons also refused to comment.

Beverage Digest said the deal was still likely, subject to approval by the Coca-Cola board. Over the last year, Glaceau has grown to be the third largest player in the beverages business in the United States. The Tata group had acquired a 30 per cent stake in the enhanced water company in August last year for $677 million.

The acquisition was seen as a key part of the company's strategy to become a larger player in the overall beverage market. This included both diversification into faster growing beverage categories such as herbal teas and enhanced water, as well as geographical diversification.

Late last month, Beverage Digest had reported that Coke, which is trying to enhance its portfolio of non-carbonated drinks, was in "serious talks" to acquire all or a part of Glaceau, which controls 3.1 per cent of the US non-carbonated beverage market.

Glaceau is the No 2 maker of enhanced water, behind PepsiCo's Propel fitness water. It sold 77 million cases last year compared with Propel's 95 million, according to Beverage Digest.

The shares of Coke were down 64 cents, or 1.2 per cent at $51.99 on the New York Stock Exchange in afternoon trading.