NEW YORK -- The Coca-Cola Co. plans to acquire the North American operations of its largest bottler in a move that mirrors similar deals by its main rival PepsiCo, as both try to gain more control of distribution to keep up with shoppers' changing tastes.
The deal calls for Coca-Cola to give up its 34 percent stake in Coca-Cola Enterprises Inc., worth $3.4 billion, and assume $8.88 billion in debt.
In a separate deal, Coca-Cola will sell its own Norwegian and Swedish bottling operations to Coca-Cola Enterprises for $822 million. Coca-Cola Enterprises also gets an option to buy Coca-Cola's 83 percent stake in its German bottling operations.
Coca-Cola Enterprises shareholders will get one share of a new Coca-Cola Enterprises company focused only on European bottling and will get a one-time $10-per-share payment. The company plans to issue debt to finance this payment and the European acquisition.
The deals are expected to close in the fourth quarter. Coca-Cola said it has halted share buybacks so far this fiscal year as a result of the deal and doesn't plan to buy back any more shares until the deal closes.
Following the deal, Coca-Cola will control about 90 percent of the bottling of its products in North America.
Coca-Cola said it expects cost savings of $350 million over four years and that the acquisition will add to earnings per share by 2012.
CEO Muhtar Kent has pledged strong growth, targeting a doubling of revenue to $200 billion by 2020. He told investors Thursday that the deal helps the company achieve that.
"Our franchise system cannot remain static. We have to create the next generation of high-return opportunities," he said.
PepsiCo announced in August it would buy its two biggest bottlers for $7.8 billion, and estimated it would see savings of $400 million, though analysts predict figures possibly double that.
Coca-Cola and Pepsi in recent decades have mostly not distributed the drinks themselves. They come up with product ideas and sell concentrate to bottlers, who then make and distribute the products to stores, controlling much of the fate of new drinks.
But now they're changing this structure as they deal with shrinking demand for soft drinks in the world's largest beverage market as people cut spending or switch to juices and teas. Owning bottlers means the drink makers can react more quickly to people's tastes and cut down on costs.
PepsiCo's deal to buy its two largest North American bottlers, a move first announced in August, is expected to close by the end of the month.
Thursday's move is a reversal for Coca-Cola, which in the wake of the PepsiCo deal defended its system, saying it lets it focus on its brands.
Coca-Cola "couldn't sit back" while PepsiCo remade its business, said Bill Pecoriello, an analyst who heads ConsumerEdge Research LLC. He told investors in a note the move is the right strategy for Coca-Cola.
But PepsiCo loses some of its advantage now, since it won't be the only company doing this. Still the company will get extra benefit from its own deal because it will be marketing its Frito-Lay snack business more closely with its beverages in stores.
Coca-Cola Enterprises shares rocketed $5.91, or 31 percent, to $25.09 in morning trading Thursday, setting new 52-week highs. Coca-Cola shares fell $2.04, or 3.7 percent, to $53.12.
Both companies are based in Atlanta.