3rd Sep 2018 06:53
LONDON (Alliance News) - Moody's Investors Service late Friday put the Aa3 senior unsecured long-term rating of The Coca-Cola Co under review for downgrade.
The action follows the soft drink manufacturer's agreement to purchase Whitbread PLC 's coffee chain Costa Ltd for GBP3.9 billion in cash. The company expects the transaction to close in the first half of 2019.
Costa operates nearly 4,000 coffee retail outlets across parts of Europe, Asia Pacific, the Middle
East and Africa. It generated revenue and earnings before interest, taxes, depreciation, and amortization of GBP1.3 billion and GBP238 million, respectively.
Moody's said its review will focus on the strategic rationale for the transaction, the operating plan for the acquired company, and the longer-term financial strategy.
The ratings agency believes that Costa adds an "incremental risk" to Coca-Cola's credit portfolio as the operation of coffee shops falls outside of Coca-Cola's core competency. Moreover, funding of the acquisition requires "a significant use of cash balances".
Looking forward, Moody's said that should its review result in a downgrade, it would not exceed two notches.
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