Business Context and Reporting Period
This Form 6-K, filed on April 20, 2021, by Coca-Cola Europacific Partners Plc (CCEP), discloses unaudited pro forma condensed combined financial information. The filing illustrates the financial impact of CCEP's proposed acquisition of 100% of Coca-Cola Amatil Limited (CCL), a major Asia Pacific bottler. The pro forma data assumes the transaction occurred on January 1, 2020, for the income statement and December 31, 2020, for the balance sheet.
Key Financial Metrics (Pro Forma)
The following metrics reflect the combined entity (CCEP and CCL) for the year ended December 31, 2020, adjusted for the acquisition and related financing:
- Revenue: €13,535 million (Historical CCEP: €10,606 million; Adjusted CCL: €2,929 million).
- Operating Profit: €830 million.
- Profit After Taxes: €449 million.
- Profit Attributable to Shareholders: €471 million.
- Basic Earnings Per Share (EPS): €0.99 (Diluted: €0.98).
- Total Assets: €28,668 million.
- Total Liabilities: €22,427 million.
- Net Debt Position: The pro forma balance sheet reflects new borrowings of approximately €5.2 billion to fund the transaction, resulting in total borrowings of €13,972 million (€12,414 million non-current + €1,558 million current).
- Cash and Cash Equivalents: €1,512 million (post-financing adjustments).
Material Changes and Adjustments
The pro forma adjustments significantly alter the historical financials of CCEP to reflect the acquisition of CCL and the associated financing:
- Acquisition Adjustments:
- Goodwill: A goodwill adjustment of €2,409 million is recorded, bringing total goodwill to €5,006 million.
- Intangible Assets: An uplift of €3,754 million in intangible assets (primarily distribution rights and brand names) is recognized.
- Depreciation and Amortization: Increased expenses of €11 million for fixed assets and €21 million for intangible assets due to fair value adjustments.
- Inventory: A €29 million fair value uplift to inventory is recognized, impacting cost of sales.
- Transaction Costs: Non-recurring costs of €96 million are expensed, reducing retained earnings and cash.
- Financing Adjustments:
- CCEP assumes new debt of €5.2 billion (€4.7 billion in Senior Notes and €500 million in commercial paper).
- Pro forma annual interest expense increases by €34 million.
Outlook, Risks, and Contingencies
Management Commentary and Assumptions: The pro forma information is prepared for illustrative purposes only and does not reflect ongoing cost savings or synergies expected from the acquisition. The transaction is accounted for under IFRS 3 (Business Combinations) using preliminary fair value estimates. The final allocation of purchase consideration may vary materially from these estimates upon completion.
Risks and Contingencies:
- Valuation Uncertainty: Final fair values for assets (inventory, property, plant, equipment, intangibles) and liabilities are preliminary. A decrease in asset fair value or increase in liability fair value would increase goodwill.
- Financing Terms: The amount and type of financing assumed (€5.2 billion) may differ from actual terms at closing.
- Integration Costs: The pro forma data excludes costs necessary to achieve synergies or integration activities.
- Regulatory Approval: The transaction is subject to regulatory approvals and the implementation of the Scheme of Arrangement.
Investor Verification Checklist
- Verify the final purchase price and consideration allocation once the acquisition closes, as current figures are preliminary estimates.
- Confirm the actual terms and interest rates of the €5.2 billion financing package.
- Monitor the final determination of goodwill and intangible asset valuations, which could impact future depreciation and amortization expenses.
- Review the actual integration costs and timeline for realizing projected synergies, which are not reflected in this pro forma data.
- Check for any regulatory conditions or delays affecting the completion of the Scheme of Arrangement.