Delayed Coca-Cola African Bottler’s $3 billion IPO May Hold Q3 2022

There are indications that the estimated $3 billion initial public offerings (IPO) by the Beverage giant, Coca-Cola, for its African bottling unit will likely hold in the third quarter after market turmoil linked to the war in Ukraine upset plans to list earlier.

Sources familiar with the development told Reuters that the IPO will hold when the market is predictable and events around the world seem to be pointing to the third quarter of the year.

The Switzerland-based company, Coca-Cola’s third-biggest bottling unit, operates in 29 European and African countries and counts Russia and Nigeria as its two biggest markets.

The Russian Federation and Ukraine account for nearly 20 per cent of its business and it has lost nearly a third of its market value since mid-February as concern mounted ahead of Russia’s invasion of Ukraine on Feb. 24.

The flotation of Coca-Cola Beverages Africa (CCBA) would be the biggest on the Johannesburg Stock Exchange since at least 2016 and a major boost for the flagging index, but Moscow’s invasion of Ukraine has shaken investor confidence and contributed to a plunge in volumes of IPOs in Europe, the Middle East and Africa as rising commodity prices and disrupted supply chains undermine growth and call valuations into question.

Two sources directly involved in the IPO told Reuters that Coca-Cola had aimed to list CCBA early in the second quarter, but that timetable had slipped to late in the third quarter.”

“It was broadly expected to be Q2, but it was also subject to market conditions,” said one of the sources who asked not to be mentioned. “The idea is to do the IPO when there’s a lot more predictability.

“Atlanta-based Coca-Cola’s largest African subsidiary CCBA announced in April last year that it would dual-list in Amsterdam and Johannesburg simultaneously within 18 months. CCBA said it was not able to comment beyond its April 2021 announcement to target an IPO in an “18-month period subject to market conditions”.

Coca-Cola, which holds a 66.5 per cent stake in CCBA, did not respond to Reuters’ request for comment.

A second source involved in the IPO said CCBA’s European peer Coca-Cola Hellenic Bottling Co was being used as the benchmark for the African unit’s valuation because of its wide exposure to developing markets.”

“Coca-Cola Hellenic has seen its P/E multiples (price to earnings ratio) drop since Russia attacked Ukraine, and its share price has come down heavily,” the source said. Its 12-month forward Price to Earning, an indication of how much investors are ready to pay for its future earnings has plunged from an average of about 20 to around 12.

Even before the Ukraine war, the JSE, which is worth just over $1 trillion, struggled to attract new IPOs, because of the weakness of South Africa’s economy. Companies have instead opted for listings in London or Amsterdam. Some 45 companies have exited the exchange in the last two years.

Proceeds raised through IPOs globally fell by 58 per cent in the January-March period, compared to the first quarter of 2021, while the number of listings fell by 38 per cent, according to data from Refinitiv.

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