Coca-Cola Co. (NYSE:KO) To Sell 20% Of Its Stake In Its South African Bottler To Black Investors

Coca-Cola Co. (NYSE:KO) will sell 20% of its stake in the South African bottling unit to local non-white investors for around $669 million following an agreement with regulators according to sources familiar with the issue.

Coca-Cola South Africa to increase black ownership to 20%

This move will help the beverage giant comply with the country’s policies that require minimum holdings in firms for black and other minorities that faced economic segregation during apartheid. In South Africa, the government requires companies to meet conditions of the Black Economic Empowerment (BEE) scheme allowing blacks to own a stake in the company thus making them legible for government tenders.

Coca-Cola will sell the stake to increase black ownership in the South African unit as part of the 2016 merger conditions with former SABMiller which is currently part of Anheuser-Busch InBev NV. In 2014 the company and SABMiller entered an agreement with the majority shareholder of the company bottling Coca-Cola’s products to merge operations with their non-alcoholic drinks operation in East and Southern Africa. This led to the formation of Coca-Cola Beverages South Africa’s (CCBSA) parent company Coca-Cola Beverages Africa.

Sale of stake part of an agreement reached in 2016

Following the merger, the company was to increase black ownership in CCBSA. Although the company hasn’t given fine details about the sale of the stake, black ownership will likely increase to 20% with employees controlling 15% stake and the rest held by outside investors. According to the company’s spokesperson, then the proposal was revised from the initial plan of selling a larger stake and regulators have given the revised plan a nod.

The almost 8,000 CCBSA employees will increase their equity in the company with all employees getting an equal stock allocation regardless of rank, years of service, or race. The entire business’s value is around 45 billion rands. Besides employees benefiting from the deal, non-white investors and other partners will also benefit. Equally, CCBSA will contribute around $5.39 million annually for the next three years to the country’s localization initiatives.