The Coca-Cola Company's planned $US500 million investment in the Indonesian operations of subsidiary Coca-Cola Amatil is fair and reasonable, an independent expert says.
In return for the investment, Coke wants to take a 29.4 per cent stake in Coca-Cola Bottling Indonesia PT, a subsidiary of Coca-Cola Amatil (CCA).
Coke's investment is designed to help fund the growth of the Indonesian operations, with CCA's shareholders due to vote on the proposal in February.
CCA on Tuesday said a report by Deloitte Corporate Finance had concluded the proposed investment was fair and reasonable to CCA shareholders not associated with Coke.
The report said CCA's board had considered a range of options for its Indonesian business, including a sale of the business, debt raising and a partial equity dilution.
"A partial equity dilution allows CCA to benefit from the future growth of the Indonesian economy, whilst maintaining balance sheet flexibility to fund other initiatives within its Australian and New Zealand business units and maintain control of the business," Deloitte said.
"Consequently, we consider the proposed investment to be the superior option."
The greater alignment between Coke and CCA would also provide the US drinks giant with a greater incentive to offer the benefit of its experience in emerging markets.
Coke's proposed investment will mean CCA receives a lower proportion of future earnings and cash flow from its Indonesian business.
But, said Deloitte, the investment would allow the Indonesian business to invest in additional infrastructure to improve earnings and growth, which may not be achievable if CCA proceeded alone.
CCA's independent directors have unanimously recommended that shareholders vote in favour of Coke's investment at a special meeting on February 17.
Indonesian regulatory approval is also required before the investment can proceed.
Coke's planned investment comes after CCA's Indonesian business suffered a drop in earnings amid rising costs and greater competition.
Shares in CCA were steady at $8.88.
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