Coke in the fray for Quaker Oats
After having turned down
20 November 2000
After having turned down the likes of PepsiCo and Danone, Quaker Oats, the US-based major in breakfast cereal and maker of the famous Gatorade sports drink, is said to be in advanced talks with Coca Cola for a possible takeover deal. It is understood that the soft drinks giant would pay more than $15 billion for the takeover.
However, informed sources from the company say that the proposed deal is likely to face stiff opposition from some members of Coca Cola's board, which includes the legendary value-investor, Warren Buffet. The Coke board is expected to meet on November 21 to consider the takeover proposal.
The Coke offer is far higher than even the most optimistic estimates of Quaker's value. Although very expensive, analysts believe that an acquisition of Quaker would allow Coca Cola to boost sales of Gatorade, the leading sports drink in the US, by distributing the drink through its unrivalled global network. They also believe that Coke could reap a $650 million benefit in revenue and cost synergies from the deal -- far more than any rival bidder.
The only major drawback is that the deal would also give Coca Cola a substantial portfolio of food assets such as oatmeal, Cap'n Crunch cereal, and Rice-A-Roni rice dishes.
Further, to overcome objections from competition authorities, Coca Cola may have to sell Powerade, its existing sports drink.