As if to reaffirm the wisdom of rival PepsiCo's recent deals with its bottlers, Coca-Cola has decided to pursue a grand acquisition of its own. Meanwhile, Dr Pepper Snapple is hungrily awaiting a windfall.
NEW YORK ( TheStreet) -- As if to reaffirm the wisdom of rival PepsiCo's ( PEP) recent deals with bottlers Pepsi Bottling Group and PepsiAmericas, Coca-Cola ( KO) decided to pursue a grand acquisition of its own. But how does its acquisition measure up to Pepsi's? On Feb. 25, Coke announced that it isis buying Coca-Cola Enterprise's ( CCE) North American bottling business for more than $12 billion. Meanwhile, CCE has agreed in principle to buy Coke's bottling operations in Norway and Sweden and to obtain the right to buy its German bottler. Complicated? A bit. And more to the point, it's not entirely clear that this deal would benefit Coke in the way some investors would have hoped. "Coke is considered an emerging market and international growth stock -- but this deal takes overseas revenues from 74% of total to 54%," Barclays Capital analyst Michael Branca told Reuters. The report also notes that the deal would result in half of Coke's revenue being derived from bottling drinks, which has smaller profit margins than its current beverage syrup business. Still, in a note to investors, J.P. Morgan analyst John Faucher generally writes favorably about the transaction -- albeit with a caveat. "The deal should help fix Coke's North American business in the long term, but it slows its growth profile with higher exposure to North America," Faucher writes. Much like Pepsi, Coke's reasoning for greater control over the bottling business has to do with the desire for greater flexibility with its distribution network and product mix, Faucher explains. Coke says it expects the transactions to generate about $350 million in synergies over four years, compared with Pepsi's projected pre-tax annualized synergies of about $400 million by 2012.