Coca-Cola Bottling Co., the nation’s largest independent Coca-Cola bottler, has signed a definitive agreement with The Coca-Cola Company to expand the bottler’s franchise territory to include the Morristown and Johnson City, Tenn., territories currently served by Coca-Cola Refreshments USA, Inc. (CCR), a wholly owned subsidiary of The Coca-Cola Company.
The agreement represents the first phase of the proposed franchise territory expansion described in the previously-announced letter of intent between the company and The Coca-Cola Company. The company expects the transaction to close by the end of the month.
The company is continuing to work toward a definitive agreement with The Coca-Cola Company for the remainder of the proposed franchise territory expansion described in the letter of intent, including Knoxville, Cleveland and Cookeville, Tenn., and Louisville, Lexington, Paducah and Pikeville, Ky., and Evansville, Ind.
“We are excited about reaching this agreement with The Coca-Cola Company to grow our company. We believe that the refranchising of these territories of the Coca-Cola system will position us to deliver increased value for our customers, shareowners and employees,” Coca-Cola Consolidated chairman and CEO J. Frank Harrison III said.
“The signing of this agreement represents a significant step in our ongoing collaboration with The Coca-Cola Company and a number of our fellow bottlers focused on how to best serve our customers and consumers in the 21st century. The nature of this expanded franchise territory provides a unique opportunity to leverage our strengths as the local Coca-Cola bottler in the many communities we serve,” added Hank Flint, Coca-Cola Consolidated president and COO.
The definitive agreement and other agreements to be entered into at closing will provide the company the exclusive rights to distribute brands owned by The Coca-Cola Company as well as certain other brands not owned by The Coca-Cola Company that are currently being distributed in the Morristown and Johnson City territories by CCR. The transaction includes the purchase by the company of distribution assets and certain working capital items from CCR relating to these territories and the purchase of exclusive rights to distribute certain non-Coca-Cola brands in these territories. The transaction also includes the grant by CCR to the company of exclusive rights to distribute brands owned by The Coca-Cola Company in these territories under a comprehensive beverage agreement to be entered into at closing. Under such agreement, the company will make a quarterly sub-bottling payment to CCR on a continuing basis after the closing for the grant of such exclusive rights. The company will not acquire any production assets from CCR and will, with certain exceptions, purchase finished goods from CCR to service customers in these territories.
Closing of the transaction is subject to the parties satisfying certain conditions. The company will file a Current Report on Form 8-K with the Securities and Exchange Commission regarding the proposed transaction.