Shareholders set to clash over visions for future of Coca-Cola
Coca-Cola, the $180bn symbol of American capitalism and consumer culture, could soon find itself in the middle of a fight between shareholders who have different visions of what their company's future should be. In an ideal world, some, like shareholder David Winters, would prefer if Coca-Cola remained owned by the investing public and spread its dividends and wealth around.
Mr Winters claims, however, that others – who may include Coca-Cola's biggest shareholder, Warren Buffett, with about 9% of the stock – wonder if the company could be ripe for the riches offered by private ownership.
Mr Winters, whose fund holds a $105m (£62m) stake in Coca-Cola, objected strongly to the company's executive pay plan earlier this year and urged Mr Buffett to support him – which Buffett eventually did ... kind of.
Now Mr Winters claims Mr Buffett's Berkshire Hathaway could be planning to take Coca-Cola private eventually, perhaps with the help of the investment firm 3G Capital, and is concerned that it could be what he calls a "sweetheart deal" that could short-change other shareholders, if an auction is not held to attract the highest price.
Financial channel CNBC reported Mr Buffett denied a buyout of Coca-Cola was being planned. Such a take-private buyout would cost more than $200bn – several times bigger than any buyout in history – so most analysts have dismissed Mr Winters' claims.
Spokesmen for Berkshire Hathaway, Coca-Cola and 3G all declined to comment.
So why is Mr Winters so suspicious? Well, Mr Buffett teamed up with Jorge Lemann's 3G Capital to take Heinz private in a $23bn (£14bn) deal last year. In Berkshire Hathaway's annual report, Buffet said: "With the Heinz purchase, moreover, we created a partnership template that may be used by Berkshire in future acquisitions of size."
Mr Lemann is Brazil's richest man and a legendary deal maker who took Burger King private in 2010.
Mr Winters has written to independent directors at Coca-Cola to express his concerns about a possible "sweetheart deal" without a "go-shop" period, like Berkshire's purchase of Heinz.
"Since Berkshire is Coca-Cola's largest shareholder, owning greater than 9% of the outstanding shares, and Warren Buffett's son Howard serves as a director of both Coca-Cola and Berkshire Hathaway, we believe our concerns are valid," he said.
Of particular concern to Mr Winters is his claim that a buyout of Coca-Cola could trigger change-of-control provisions for its top executives. Mr Winters said: "If such a deal were completed, Coca-Cola chairman and chief executive Muhtar Kent alone would stand to reap a nine-figure payday."
Tensions are running high. Most analysts are sceptical that a buyout worth more than $200bn (£118bn) could ever be done.
One Berkshire Hathaway shareholder, the hedge fund manager Whitney Tilson, said: "They are in no position to make a bid for it any time soon – at least five years, I'd guess. Coke is too big, the stock is too expensive, Berkshire and 3G's war chest is depleted by the Heinz acquisition, and 3G will have its hands full with Heinz for at least a year or two.
"As a long-time Berkshire shareholder, I hope this deal happens someday, but I don't think it's likely."