Coca-Cola (NYSE:KO) has traveled far south of our borders for its latest acquisition. In conjunction with an affiliate, Mexican bottler Coca-Cola FEMSA (NYSE:KOF), the beverage giant reached an agreement with global consumer goods giant Unilever (NYSE:UL) to buy the latter's AdeS -- a maker of soy-based drinks headquartered in Argentina. The price of the purchase is roughly $575 million.
Besides its native Argentina, AdeS distributes its drinks to Brazil, Mexico, Uruguay, Paraguay, Bolivia, Chile, and Colombia.
The acquisition has been approved by the boards of directors of Coca-Cola, Coca-Cola FEMSA, and Unilever. It is subject to review by the relevant regulatory bodies.
Does it matter?
The deal makes sense for all parties involved. Unilever is itching to exit the comestibles business in favor of higher-margin consumer goods categories, while Coca-Cola needs to (sorry) juice its growth, and Coca-Cola FEMSA is the logical partner for the deal. Although a niche product, AdeS has a good presence in its region, posting sales of around $284 million in 2015.
For Unilever, the divestment is the latest in a series of brand sell-offs. The company has recently unloaded such well-known brands as Slim-Fast diet drinks and Ragu pasta sauce. The company's shares rose slightly after the deal was announced.
The stock price of Coca-Coca was largely unaffected, likely because an asset the size of AdeS is a drop in the bucket of a company with 20 brands that bring in more than $1 billion in annual sales apiece.
That said, AdeS should complement its brand lineup nicely in a region that has great potential for growth. And for Unilever, the deal is another step toward its goal of divesting away from food and beverage products.
Eric Volkman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Coca-Cola, and recommends Unilever. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.