Coca-Cola Amatil Limited

Now that National Foods is being stalked by New Zealand dairy giant Fonterra, it has let its bid for fruit processor SPC Ardmona fall by the wayside. But shareholders in SPC have nothing to fear because Coca-Cola Amatil has swooped upon National Foods's leftovers in a bid to increase its 'share of throat' (we're not kidding—managing director, Terry Davis, used the term at this year's annual meeting). Having been frustrated in his attempt to buy beverage businesses such as fruit juice company Berri, Davis has turned his attention to food instead. The price of around $500m plus debt looks high but will, of course, still result in 'earnings per share accretion'. That's not the criterion we use to evaluate an acquisition, though. Instead, we ask if it will increase long-term value for shareholders and, using that measure, we can't see any justification for this deal. Combining a large capital-intensive business with a smaller, even worse, one does nothing to improve the whole company. Coca-Cola Amatil shares have risen 8% since issue 158/Aug 04 (Sell—$7.06) and we think management might one day regret digesting SPC's baked beans. SELL.