Coca-Cola Amatil Ltd (ASX: CCL) has announced that it is going to sell its SPC fruit and vegetable processing business.

Coca-Cola Amatil is the Australian distributor and rights holder to the famous Coca-Cola brand (which is owned by the US parent Coca-Cola Company). Coca-Cola Amatil started life in 1904 as British Tobacco Company. The ‘Amatil’ in its name came in 1977 when it was renamed as Allied Manufacturing and Trade Industries Limited (AMATIL).

What Did Coca Cola Amatil Get For SPC?

The SPC business is going to be sold for $40 million at completion by the end of the month to Shepparton Partners Collective.

Coca Cola Amatil said that when taking into account forecasted working capital balances, working capital adjustments to the sale price and costs of disposal, a profit of $10 million to $15 million is expected to be recorded on completion.

The sale agreement also includes a four-year deferred payment which, subject to business performance, could result in up to an additional $15 million.

Coca Cola has been working on this sale since August 2018. Pleasingly, the new owners of the business have committed to offering employment to all permanent staff.

Coca Cola Managing Director Alison Watkins said: “This outcome is good news for SPC and good news for the Goulburn Valley.

Shepparton Partners Collective recognises the value of SPC’s brands, the opportunities for innovation and category growth in Australia and its export potential. 

Importantly, they’re also committed to offering ongoing employment to all permanent members of the SPC team. This ensures continued access to the world-class capability and experience in fruit and vegetable processing which is brought to the company by SPC Managing Director Reg Weine and his team.”

Is Coca Cola Amatil A Buy?

Coca Cola has done well to capture this sale as it has long wished to offload the struggling SPC business. I’m glad it will still be a place of employment for the people that work there as well.

However, I’m unsure if our local Coca Cola business can meaningfully grow profit in this world of private brands and lowering margins.

I’d rather buy the reliable shares in the free report below over Coca Cola Amatil.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.