Coca-Cola Enterprises Stock: Price Set to a Degree
NEW YORK (
) --
Coca-Cola Enterprises
(CCE)
(CCE) stock has tanked during Monday's trading session after the company and
Coca-Cola Company
(KO) - Get Report
announced that they had completed their bottling transaction.
The completion of the deal triggered the subsequent CCE $10 per share cash distribution to shareholders. This one-time distribution was expected to begin flowing through on Monday. Based on how long it takes an investor's brokerage firm to handle, the distribution should take no more than a few days. The only exception to that would be if investors hold actual certificates, requiring them to physically exchange them.
CCE stock was trading down 30.8% to $22 in early afternoon trading. Like other analysts, Wall Street Strategies' David Silver said "you can imagine the drop as more of a split than actual drop." The special $10 cash distribution lowers the value of equity by that amount, "so assuming that the stock was fairly valued" at Friday's closing price of $31.80 , the stock is more accurately reflected at $21.80.
That said, the stock is actually trading a tad higher early afternoon on Monday.
Analysts believe that shares of CCE should be settling around its current price. "In terms of today, the price is set to a degree," Schaeffer's technical strategist Ryan Detrick said. "You can assume there won't be too much volatility now that this big move has been done."
Meanwhile, BGC Financial director and technical analyst Roger Volz said charts will be adjusted to reflect the payout -- much like a split -- and after that, the charts should remain as is for a while.
Morningstar analyst Philip Gorham for one said in an equity research report that Morningstar will lower its fair value estimate for CCE to account for the $10 per share special dividend that's being paid to shareholders. However, the fair value estimate for Coca-Cola company remains unchanged because "our valuation already assumes pro forma cash flows for the deal."
RealMoney
contributor and Trinity Asset Management's Brian Gilmartin added that $10 is "a lot of cash" for such payouts.
The Morningstar analyst has a fair value estimate of $28 for CCE and fair value estimate of $57 for Coca-Cola.
"Although Coke is trailing its great rival
PepsiCo
(PEP) - Get Report
in the move toward vertical integration, we think it is a sensible strategy for the next decade," Gorham said. "We also like the deal from CCE's perspective."
In February, the Coca-Cola Company agreed to acquire the assets and liabilities of CCE's entire North American business for about $12.3 billion.
The acquisition of CCE's North American business includes consideration of Coca-Cola's 34% equity ownership in Coca-Cola Enterprises, valued at $3.4 billion at the date of the announcement and the assumption of $8.88 billion in debt. At the same time, CCE acquired the company's bottling operations in Norway and Sweden for $822 million.
In addition, CCE will have the right to buy Coca-Cola's majority interest in its German bottler for fair value, 18 to 39 months after the deal announcement. Also, it said it would pay shareowners $10 per share in cash at closing.
CCE said that with the closing of the transaction, it will retain its name and operate as a new public company consisting of its existing European territories, as well as the bottling operations in Norway and Sweden acquired from The Coca-Cola Company.
-- Written by Andrea Tse in New York.
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