SABMiller and Coca-Cola Reach Deal Over Bottling Merger in South Africa

Coca-Cola and SABMiller struck a new deal with the government of South Africa to help push a long pending merger through of their bottling operations across Africa.

In November of 2014, Coca-Cola entered into a deal with SABMiller to combine bottling assets along with Gutsche Family Investments a privately held company to form a joint venture that spanned 12 countries in Africa and about 40% of the soft drink maker’s volumes for the continent.

SABMiller, which since has agreed to an acquisition by the world’s largest brewer Anheuser-Busch InBev, is set to hold 57% of this newly formed company Coca-Cola Beverages Africa. Coke will own over 11%.

The rest will fall under the ownership of Gutsche, a major Coke African bottling operations shareholder.

However, this deal has not yet closed as the government of South Africa holds concerns about protecting jobs in its country.

On Wednesday, SABMiller outlined terms of the deal with the government in South Africa, saying the new bottling operation for the soft drink maker, will be the largest in Africa if approved and keep employees at least three years following the deal being approved. Layoffs of any senior staff will be of a limited nature.

The company agreed as well to invest 800 million rands or $54.34 million to help retailers and support farmers, as well as a number of commitments that are smaller such as allowing retailers to allot 10% of space in coolers holding Coca Cola for the drinks of competitors that are smaller if needed.

As part of the bottling deal in 2014, Coke said it would pay over $260 million for the right worldwide to Appletiser the SABMiller carbonated apple juice as well as the right to 19 other nonalcoholic brands in Latin America and Africa.

Wednesday the businesses agreed to sell up to 20% of Appletiser shares to appropriated black shareholders who are expected to take part actively in the business and grow the production of Appletiser in South Africa having a goal of exporting it to other parts of Africa as well as outside the continent.

The competition tribunal of South Africa needs to make an approval of the bottling merger for this deal to also close. A hearing for that merger starts May 9.

The agreements on Wednesday come following last month’s agreement reached by AB InBev with the government of South Africa to create an investment fund of $69 million.