Lawsuit challenges Coke-CCE deal

By Jeremiah McWilliams

The Atlanta Journal-Constitution

Coca-Cola's planned takeover of Coca-Cola Enterprises' North American bottling operations would unfairly underpay CCE shareholders, according to a lawsuit that seeks class action status.

Several other law firms and shareholder advocacy groups say they are investigating possible claims in the wake of last week's announcement of the nearly $13 billion deal.

Shareholder suits often follow high-dollar mergers and acquisition announcements and can drag on well after the deals close.

"They are very, very common," said Michael Pryce-Jones, senior analyst at Proxy Governance Inc. "It can be a given that somebody is going to complain."

The lawsuit filed in Fulton County Superior Court by CCE shareholder Robert Lang alleges that Coca-Cola's plan to acquire most of CCE doesn't match the bottler's true value. The case alleges that Coca-Cola's has interfered with and exercised control over CCE, funneling profits to itself and misusing its large stake in CCE.

The lawsuit seeks damages and a court order blocking the plan, under which CCE shareholders would get $10 and one share in a "new" CCE focused on Europe for each share they currently hold.

"The security that CCE shareholders will receive is worth substantially less than the value of the security that they are giving up," according to the suit. CCE called the lawsuit "totally without merit," while Coke vowed to vigorously defend itself.

Coca-Cola owns 34 percent of Coca-Cola Enterprises, which handles about 75 percent of Coke's beverage volume in the U.S.

The suit says the North American agreement is only the latest example of Coca-Cola putting the squeeze on its main bottler. It alleges Coca-Cola, through its stock ownership and business dealings, controls and dominates its bottler and has breached its duty of "entire fairness" to CCE shareholders.

But John Sicher, editor of Beverage Digest, said Coca-Cola and CCE have been very careful in how they conduct certain kinds of transactions and decision-making. That is necessary because of their complex relationship, he said. "Beyond the legal architecture they set up, the power is pretty balanced between the two companies, given how much of Coke's volume CCE handles," said Sicher.