rose $4.69, or more than 5 per cent, to close at $95.
While the company
confirmed reports of the proposed takeover offer, it reiterated,
in a move to pacify investors, that it would only consider
the proposal seriously if the takeover plays a vital role
in advancing its strategy of building a total non-alcoholic
While the proposed
takeover offer is reportedly being actively supported
by most senior management of Coke, including Douglas Daft,
chairman and chief executive officer, there is a strong
feeling among investors and analysts that external directors,
including the legendary value investor, Warren Buffet,
will not support the move.
takeover offer may face opposition from competition regulators.
US regulators may not be satisfied by a simple disposal
of Coca Cola's own Powerade sports drink, Gatorade's closest
competitor, with an 11 per cent share of the market. Coca
Cola would have to find a strong buyer for Powerade to
convince the regulators. Candidates would include Nestle,
the Swiss food giant, or Cadbury-Schweppes, the UK confectionery
and drinks group.
Wall Street had differing views. Some were of the opinion
that the Coke move signaled the companys determination
to prevent arch rival, PepsiCo, from getting its hands
on the Quaker business. Some expressed their concern that
Coke was taking on Quakers breakfast cereals and
snacks businesses as part of the proposed deal. Coke would
be stuck with this deal and not be able to dispose assets
for two years, if it were to treat this transaction as
a tax-free pooling of interests. Yet others believed that
this move, at a time when the company had its hands full
with restructuring, is a knee-jerk reaction to competition.
is estimated that Coca Cola would be
paying 25-30 times Gatorade's expected 2001 earnings before
interest, tax, depreciation and amortisation. Gatorade
is by far the leading sports drink in the US with a market
share of 84 per cent.
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