TIDMCCEP

RNS Number : 9603V

Coca-Cola European Partners plc

20 April 2021

Coca-Cola European Partners plc ("CCEP") is disclosing the following unaudited pro forma condensed combined financial information prepared in connection with proposed financings of the Coca-Cola Amatil Limited (CCL) acquisition by CCEP.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

In November 2020, CCEP and Coca-Cola Amatil Limited ("CCL") entered into a binding Scheme Implementation Deed for the acquisition of 69.2% of the entire existing issued share capital of CCL, held by shareholders other than The Coca-Cola Company ("TCCC") for A$12.75 per share in cash less the second half 2020 dividend of A$0.18 per share declared by CCL on 18 February 2021 ("2H20 Dividend"), pursuant to a scheme of arrangement (the "Scheme"). CCL is one of the largest bottlers and distributors of ready to drink non-alcoholic and alcoholic beverages and coffee in the Asia Pacific region and is the authorized bottler and distributor of TCCC's beverage brands in Australia, New Zealand, Fiji, Indonesia, Papua New Guinea and Samoa.

CCEP made a further, best and final, offer in February 2021 in which it increased the Scheme consideration to A$13.50 per share in cash less the 2H20 Dividend.

CCEP has also entered into a Co-operation and Sale Deed with TCCC (the "Co-operation Agreement") which is conditional upon the implementation of the Scheme. Under the Co-operation Agreement, CCEP will acquire 10.8% of CCL shares from TCCC for A$9.57 per share in cash less the 2H20 Dividend and can acquire the remaining 20% of CCL's shares held by TCCC for A$10.75 per share less the 2H20 Dividend, either in cash or a combination of cash and the issue of CCEP shares at an agreed conversion ratio. In March 2021, in accordance with the Co-operation Agreement, CCEP elected to purchase the remaining 20% of CCL's shares held by TCCC for cash.

The Scheme and the Co-operation Agreement are referred to herein as the "Acquisition".

The Acquisition will be accounted for as a business combination using the acquisition method of accounting in accordance with International Financial Reporting Standards ("IFRS"). Accordingly, CCL's assets to be acquired and liabilities to be assumed have been adjusted based on preliminary estimates of fair value.

The following unaudited pro forma condensed combined financial information and related notes (the "Pro Forma Financial Information") is based on the historical consolidated financial statements of CCEP and the historical financial statements of CCL and has been prepared to reflect the Acquisition. The Acquisition together with the related financing are together referred to as the "Transaction." The pro forma adjustments related to the Transaction include:

 
 -   The acquisition of 100% of CCL by CCEP; 
 -   Reflecting the assets, liabilities, and non-controlling interests of 
      CCL at their preliminary estimated fair values; 
 -   Proceeds and use of financings. Refer to Note 4 of the Pro Forma Financial 
      Information; and, 
 -   The translation of CCL's financial information from Australian Dollars 
      ("AUD" or A$) to Euros ("EUR" or EUR). 
 

The Pro Forma Financial Information is derived from and should be read in conjunction with the most recent historical financial statements of CCEP and CCL. For both CCEP and CCL this is financial information as at and for the year ended 31 December 2020. The historical financial statements and related notes thereto of CCEP are filed with the US Securities and Exchange Commission as part of CCEP's Annual Report on Form 20-F for the year ended 31 December 2020. The historical financial statements and related notes thereto of CCL can be found on CCL's website at https://www.ccamatil.com/au/Investors/Financial-reporting and are not incorporated by reference herein or form a part hereof.

The unaudited pro forma condensed combined income statement for the year ended 31 December 2020 (the "Pro Forma Income Statement") gives effect to the Acquisition as if it had occurred on 1 January 2020, while the unaudited pro forma condensed combined statement of financial position at 31 December 2020 (the "Pro Forma Statement of Financial Position") gives effect to the Acquisition as if it had occurred on 31 December 2020.

The Pro Forma Financial Information has not been prepared in accordance with the requirements of Regulation S-X of the US Securities Act of 1933, the Prospectus Regulation, or any generally accepted accounting standards. Refer to Note 1 of the Pro Forma Financial Information.

The Pro Forma Financial Information has been prepared in order to illustrate the effects of the Acquisition on the financial position and results of operations of CCEP. It is based on information and assumptions that CCEP believes are reasonable, including assumptions regarding the terms of the Acquisition. The Pro Forma Financial Information has been prepared for illustrative purposes only and because of its nature, addresses a hypothetical situation. It does not intend to represent what CCEP's financial position or results of operations actually would have been if the Acquisition had been completed on the dates indicated, nor does it intend to represent, predict or estimate the results of operations for any future period or financial position at any future date. In addition, it does not reflect ongoing cost savings that CCEP expects to achieve as a result of the Acquisition or the costs necessary to achieve these cost savings or synergies. As pro forma information is prepared to illustrate retrospectively the effects of transactions that will occur in the future, there are limitations that are inherent to the nature of pro forma information. As such, had the Acquisition taken place on the dates assumed above, the actual effects would not necessarily have been the same as those presented in the Pro Forma Financial Information.

UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT

FOR THE YEARED 31 DECEMBER 2020

 
                                                                      Transaction Accounting Adjustments 
                                                ------------------------------------------------------------------------------ 
                                                                            Intangible 
                                                 Inventory   Fixed asset      asset      Transaction 
                                      Adjusted  fair value   depreciation  amortization  and related     Total      Financing   CCEP pro 
(in EUR millions,         Historical    CCL     adjustment    adjustment    adjustment      costs     acquisition  Adjustments   forma 
except where specified)      CCEP     (Note 2)  (Note 3(b))  (Note 3(b))   (Note 3(b))   (Note 3(b))  adjustments   (Note 4)    combined 
-----------------------   ----------  --------  -----------  ------------  ------------  -----------  -----------  -----------  -------- 
Revenue                       10,606     2,929            -             -             -            -            -            -    13,535 
Cost of sales                (6,871)   (1,737)         (29)           (9)             -            -         (38)            -   (8,646) 
------------------------  ----------  --------  -----------  ------------  ------------  -----------  -----------  -----------  -------- 
Gross Profit                   3,735     1,192         (29)           (9)             -            -         (38)            -     4,889 
Operating expenses           (2,922)   (1,022)            -           (2)          (21)         (92)        (115)            -   (4,059) 
------------------------  ----------  --------  -----------  ------------  ------------  -----------  -----------  -----------  -------- 
Operating profit                 813       170         (29)          (11)          (21)         (92)        (153)            -       830 
Finance income                    33        20            -             -             -            -            -            -        53 
Finance costs                  (144)      (57)            -             -             -          (4)          (4)         (34)     (239) 
------------------------                                                                                                        -------- 
Total finance costs, net       (111)      (37)            -             -             -          (4)          (4)         (34)     (186) 
Non-operating items              (7)       (2)            -             -             -            -            -            -       (9) 
------------------------  ----------  --------  -----------  ------------  ------------  -----------  -----------  -----------  -------- 
Profit before taxes              695       131         (29)          (11)          (21)         (96)        (157)         (34)       635 
Taxes                          (197)      (44)            8             3             6           28           45           10     (186) 
------------------------  ----------  --------  -----------  ------------  ------------  -----------  -----------  -----------  -------- 
Profit after taxes               498        87         (21)           (8)          (15)         (68)        (112)         (24)       449 
Profit attributable to 
 shareholders                    498       109         (21)           (8)          (15)         (68)        (112)         (24)       471 
Profit attributable to 
 non-controlling 
 interests                         -      (22)            -             -             -            -            -            -      (22) 
------------------------                                                                                                        -------- 
Profit after taxes               498        87         (21)           (8)          (15)         (68)        (112)         (24)       449 
========================  ==========  ========  ===========  ============  ============  ===========  ===========  ===========  ======== 
 
(per share information 
in EUR) 
Basic earnings per 
 share:                         1.09                                                                                                0.99 
Diluted earnings per 
 share:                         1.09                                                                                                0.98 
 
(share information in 
millions) 
Basic weighted average 
 number of shares                455                                                                                                 455 
Diluted weighted average 
 number of shares                456                                                                                                 456 
 

The accompanying notes are an integral part of this unaudited pro forma condensed combined financial information.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION

AS OF 31 DECEMBER 2020

 
                                                      Transaction Accounting Adjustments 
                     ----------  ----------  ----------------------------------------------------  --------- 
                                              Preliminary 
                                               purchase 
                                             consideration  Transaction                              CCEP 
                                  Adjusted        and       and related     Total      Financing   total pro 
                     Historical     CCL       allocation       costs     acquisition  Adjustments    forma 
(in EUR millions)       CCEP      (Note 2)    (Note 3(a))   (Note 3(b))  adjustments   (Note 4)    combined 
------------------   ----------  ----------  -------------  -----------  -----------  -----------  --------- 
ASSETS: 
Non-current: 
Intangible assets         8,414         667          3,754            -        3,754            -     12,835 
Goodwill                  2,517          80          2,409            -        2,409            -      5,006 
Property, plant and 
 equipment                3,860       1,206             94            -           94            -      5,160 
Non-current 
 derivative assets            6          71              -            -            -            -         77 
Deferred tax assets          27           5              -            -            -            -         32 
Other non-current 
 assets                     337          61              -            -            -            -        398 
-------------------  ----------  ----------  -------------  -----------  -----------  -----------  --------- 
Total non-current 
 assets                  15,161       2,090          6,257            -        6,257            -     23,508 
-------------------  ----------  ----------  -------------  -----------  -----------  -----------  --------- 
Current: 
Current derivative 
 assets                      40          13              -            -            -            -         53 
Current tax assets           19           6              -            -            -            -         25 
Inventories                 681         356             29            -           29            -      1,066 
Amount receivable 
 from related 
 parties                    150          33              -            -            -            -        183 
Trade accounts 
 receivable               1,439         504              -            -            -            -      1,943 
Other current 
 assets                     224         154              -            -            -            -        378 
Cash and cash 
 equivalents              1,523         630        (5,766)         (96)      (5,862)        5,221      1,512 
-------------------  ----------  ----------  -------------  -----------  -----------  -----------  --------- 
Total current 
 assets                   4,076       1,696        (5,737)         (96)      (5,833)        5,221      5,160 
-------------------                          -------------  -----------  -----------  -----------  --------- 
Total assets             19,237       3,786            520         (96)          424        5,221     28,668 
===================  ==========  ==========  =============  ===========  ===========  ===========  ========= 
 
LIABILITIES: 
Non-current: 
Borrowings, less 
 current portion          6,382       1,311              -            -            -        4,721     12,414 
Employee benefit 
 liabilities                283          36              -            -            -            -        319 
Non-current 
 provisions                  83           -              -            -            -            -         83 
Non-current 
 derivative 
 liabilities                 15          75              -            -            -            -         90 
Deferred tax 
 liabilities              2,134         143          1,215            -        1,215            -      3,492 
Non-current tax 
 liabilities                131           -              -            -            -            -        131 
Other non-current 
 liabilities                 44           -              -            -            -            -         44 
-------------------                                                      ----------- 
Total non-current 
 liabilities              9,072       1,565          1,215            -        1,215        4,721     16,573 
-------------------  ----------  ----------  -------------  -----------  -----------  -----------  --------- 
Current: 
Current portion of 
 borrowings                 805         253              -            -            -          500      1,558 
Current portion of 
 employee benefit 
 liabilities                 13          51              -            -            -            -         64 
Current provisions          154           -              -            -            -            -        154 
Current derivative 
 liabilities                 62          40              -            -            -            -        102 
Current tax 
 liabilities                171          20              -            -            -            -        191 
Amounts payable to 
 related parties            181          87              -            -            -            -        268 
Trade and other 
 payables                 2,754         763              -            -            -            -      3,517 
-------------------                                                      ----------- 
Total current 
 liabilities              4,140       1,214              -            -            -          500      5,854 
-------------------  ----------  ----------  -------------  -----------  -----------  -----------  --------- 
Total liabilities        13,212       2,779          1,215            -        1,215        5,221     22,427 
===================  ==========  ==========  =============  ===========  ===========  ===========  ========= 
 
EQUITY 
Share capital                 5       1,179        (1,179)            -      (1,179)            -          5 
Share premium               192           -              -            -            -            -        192 
Merger reserves             287           -              -            -            -            -        287 
Other reserves            (537)         121          (121)            -        (121)            -      (537) 
Retained earnings         6,078       (490)            490         (96)          394            -      5,982 
-------------------                                                      ----------- 
Equity attributable 
 to shareholders          6,025         810          (810)         (96)        (906)            -      5,929 
-------------------  ----------  ----------  -------------  -----------  -----------  -----------  --------- 
Non-controlling 
 interests                    -         197            115            -          115            -        312 
Total equity              6,025       1,007          (695)         (96)        (791)            -      6,241 
===================  ==========  ==========  =============  ===========  ===========  ===========  ========= 
 

The accompanying notes are an integral part of this unaudited pro forma condensed combined financial information.

Note 1. Basis of preparation

The Pro Forma Financial Information set forth herein is based upon the historical financial statements of CCEP and CCL and has been prepared to illustrate the effects of the Transaction as if it had occurred on:

 
 -   1 January 2020 in respect of the Pro Forma Income Statement; and, 
 -   31 December 2020 in respect of the Pro Forma Statement of Financial Position. 
 

The Pro Forma Financial Information is presented for illustrative purposes only and does not necessarily reflect the results of operations or the financial position that actually would have resulted had the Acquisition occurred at the dates indicated, or project the results of operations or financial position for any future dates or periods.

The Acquisition will be accounted for as a business combination using the acquisition method of accounting in accordance with IFRS. Accordingly, CCL's assets to be acquired and liabilities to be assumed have been adjusted based on preliminary estimates of fair value. Any excess of the purchase price over the fair value of identified assets acquired and liabilities assumed will be recognized as goodwill. The actual fair values will be determined upon the consummation of the Acquisition and may vary from these preliminary estimates.

The Pro Forma Financial Information does not reflect the cost of any integration activities or benefits from the Acquisition, including potential synergies that may be generated in future periods.

The historical financial statements of CCEP are prepared in accordance with IFRS and are presented in Euros. The historical financial statements of CCL are prepared in accordance with Australian Accounting Standards, which complies with IFRS and are presented in Australian Dollars. The Pro Forma Financial Information includes reclassifications and adjustments to conform CCL's historical accounting presentation to CCEP's accounting presentation, in each case for the relevant periods. The CCL income statement has been translated from Australian Dollars to Euros using the average monthly exchange rates for the periods of 0.6036. The CCL balance sheet has been translated from Australian Dollars to Euros using exchange rate at 31 December 2020 of 0.6184.

The estimated income tax impacts of the pre-tax adjustments that are reflected in the Pro Forma Financial Information are calculated using an estimated blended statutory rate of 29%, based upon the annual period ending 31 December 2020. The blended statutory rate and the effective tax rate of the combined group could be significantly different depending on the post-transaction activities and geographical mix of profit before tax.

Note 2: Adjustments to CCL's financial statements

The financial statements below illustrate the impact of adjustments made to CCL's financial statements in order to present them on a basis consistent with CCEP's accounting policies under EU IFRS. These adjustments reflect CCEP's best estimates based upon the information currently available to CCEP and could be subject to change once more detailed information is obtained. The CCL financial information has been adjusted to:

 
 -   Present CCL's financial information on a basis consistent with the accounting 
      policies adopted by CCEP; and 
 -   Translate from Australian Dollars to Euros, which is the presentation 
      currency of CCEP. 
 

U NAUDITED ADJUSTED CCL INCOME STATEMENT

FOR THE YEARED 31 DECEMBER 2020

 
                                                                                               Adjusted 
                                                          Reclassifications                       CCL 
                                             Historical 
                                                 CCL           AUD (A$)       Adjusted CCL      EUR (EUR) 
  (in millions)                                AUD (A$)       (Note 2(a))        AUD (A$)      (Note 2(b)) 
---------------------------------------      ----------   -----------------   ------------   ------------- 
Revenue                                               -               4,853          4,853           2,929 
Trading revenue                                   4,762             (4,762)              -               - 
Cost of sales                                         -             (2,877)        (2,877)         (1,737) 
Cost of goods sold                              (2,862)               2,862              -               - 
Delivery                                          (221)                 221              -               - 
-------------------------------------------  ----------   -----------------   ------------   ------------- 
Gross profit                                      1,679                 297          1,976           1,192 
Other revenues                                       39                (39)              -               - 
Operating expenses                              (1,438)               (256)        (1,693)         (1,022) 
Operating profit                                    280                   3            283             170 
Finance income                                       33                   -             33              20 
Finance costs                                      (95)                   -           (95)            (57) 
-------------------------------------------  ----------   -----------------   ------------   ------------- 
Total finance costs, net                           (62)                   -           (62)            (37) 
Non-operating items                                   -                 (3)            (3)             (2) 
-------------------------------------------  ----------   -----------------   ------------   ------------- 
Profit before tax                                   218                   -            218             131 
-------------------------------------------  ----------   -----------------   ------------   ------------- 
Taxes                                                 -                (73)           (73)            (44) 
Income tax expense                                 (73)                  73              -               - 
-------------------------------------------  ----------   -----------------   ------------   ------------- 
Profit after tax                                    145                   -            145              87 
-------------------------------------------  ----------   -----------------   ------------   ------------- 
Profit attributable to shareholders                   -                 180            180             109 
Attributable to shareholders of 
 Coca-Cola Amatil Limited                           180               (180)              -               - 
Profit attributable to non-controlling 
 interests                                         (35)                   -           (35)            (22) 
-------------------------------------------  ----------   -----------------   ------------   ------------- 
Profit after tax                                    145                   -            145              87 
-------------------------------------------  ----------   -----------------   ------------   ------------- 
 

UNAUDITED ADJUSTED CCL BALANCE SHEET

AS OF 31 DECEMBER 2020

 
                                                                                Adjusted 
                                              Reclassifications                    CCL 
                                 Historical                        Adjusted 
                                     CCL           AUD (A$)           CCL        EUR (EUR) 
                                                                                   (Note 
  (in millions)                    AUD (A$)       (Note 2(a))       AUD (A$)       2(b)) 
-------------------------------  ----------   -----------------   ----------   ----------- 
ASSETS: 
Non-current: 
Intangible assets                     1,208               (130)        1,078           667 
Goodwill                                  -                 130          130            80 
Investments                              61                (61)            -             - 
Defined benefit superannuation 
 plans                                    7                 (7)            -             - 
Property, plant and equipment         1,519                 432        1,951         1,206 
Right of use assets                     432               (432)            -             - 
Non-current derivative 
 assets                                   -                 115          115            71 
Derivatives                             115               (115)            -             - 
Deferred tax assets                       8                   -            8             5 
Other non-current assets                  -                  99           99            61 
Other receivables                         1                 (1)            -             - 
Prepayments                              18                (18)            -             - 
Loans receivable interest 
 bearing                                 12                (12)            -             - 
-------------------------------  ----------   -----------------   ----------   ----------- 
Total non-current assets              3,381                   -        3,381         2,090 
 
Current: 
Current derivative assets                 -                  22           22            13 
Derivatives                              22                (22)            -             - 
Other financial assets 
 at amortised cost                       37                (37)            -             - 
Current tax assets                       10                   -           10             6 
Inventories                             576                   -          576           356 
Amount receivable from 
 related parties                          -                  53           53            33 
Trade accounts receivable                 -                 815          815           504 
Trade and other receivables             964               (964)            -             - 
Other current assets                      -                 249          249           154 
Other financial assets                   30                (30)            -             - 
Prepayments                              86                (86)            -             - 
Cash and cash equivalents                 -               1,018        1,018           630 
Cash assets                           1,018             (1,018)            -             - 
-------------------------------  ----------   -----------------   ----------   ----------- 
Total current assets                  2,743                   -        2,743         1,696 
-------------------------------  ----------   -----------------   ----------   ----------- 
Total assets                          6,124                   -        6,124         3,786 
===============================  ==========   =================   ==========   =========== 
 

UNAUDITED ADJUSTED CCL BALANCE SHEET

AS OF 31 DECEMBER 2020

 
                                                                                     Adjusted 
                                                   Reclassifications                    CCL 
                                      Historical                        Adjusted 
                                          CCL           AUD (A$)           CCL        EUR (EUR) 
                                                                                        (Note 
 (in millions)                          AUD (A$)       (Note 2(a))       AUD (A$)       2(b)) 
------------------------------------  ----------   -----------------   ----------   ----------- 
LIABILITIES 
Non-current 
Borrowings, less current 
 portion                                       -               2,120        2,120         1,311 
Borrowings                                 1,693             (1,693)            -             - 
Lease liabilities                            427               (427)            -             - 
Employee benefit liabilities                   -                  59           59            36 
Employee benefits provisions                  11                (11)            -             - 
Defined benefit superannuation 
 plans                                        48                (48)            -             - 
Non-current derivative liabilities             -                 122          122            75 
Derivatives                                  122               (122)            -             - 
Deferred tax liabilities                     231                   -          231           143 
                                      ----------   -----------------   ----------   ----------- 
Total non-current liabilities              2,532                   -        2,532         1,565 
 
Current: 
Current portion of borrowings                  -                 409          409           253 
Borrowings                                   336               (336)            -             - 
Lease liabilities                             73                (73)            -             - 
Current portion of employee 
 benefit liabilities                           -                  82           82            51 
Employee benefits provisions                  82                (82)            -             - 
Current derivative liabilities                 -                  65           65            40 
Derivatives                                   65                (65)            -             - 
Current tax liabilities                       33                   -           33            20 
Amounts payable to related 
 parties                                       -                 141          141            87 
Trade and other payables                   1,295                (60)        1,235           763 
Other financial liabilities                   81                (81)            -             - 
------------------------------------  ----------   -----------------   ----------   ----------- 
Total current liabilities                  1,965                   -        1,965         1,214 
------------------------------------  ----------   -----------------   ----------   ----------- 
Total liabilities                          4,497                   -        4,497         2,779 
====================================  ==========   =================   ==========   =========== 
 
EQUITY 
Share capital                              1,919                (13)        1,906         1,179 
Treasury shares                             (13)                  13            -             - 
Other reserves                                 -                 194          194           121 
Reserves                                     194               (194)            -             - 
Retained earnings                              -               (792)        (792)         (490) 
Accumulated losses                         (792)                 792            -             - 
------------------------------------  ----------   -----------------   ----------   ----------- 
Equity attributable to shareholders        1,308                   -        1,308           810 
Non-controlling interests                    319                   -          319           197 
------------------------------------ 
Total equity                               1,627                   -        1,627         1,007 
====================================  ==========   =================   ==========   =========== 
 

(a) Preliminary pro forma classification adjustments have been made to CCL's income statement and balance sheet in order to present them on a basis consistent with CCEP. These adjustments have not changed CCL's profit for the year, total assets or total liabilities. These adjustments reflect CCEP's best estimates based upon information currently available to CCEP and could be subject to change once more detailed information is obtained.

(b) The CCL income statement has been translated from Australian Dollars to Euros using the average monthly exchange rates for the periods of 0.6036. The CCL balance sheet has been translated from Australian Dollars to Euros using exchange rate at 31 December 2020 of 0.6184.

Note 3: Transaction accounting adjustments - acquisition

   (a)   Preliminary purchase consideration and allocation 

The Acquisition is reflected in the Pro Forma Financial Information as being accounted for under the acquisition method in accordance with IFRS 3 - Business Combinations. Under this method the CCL assets acquired and liabilities assumed have been recorded on preliminary estimates of fair value. The final fair values will be determined upon the consummation of the Acquisition and may vary materially from these preliminary estimates.

The estimated purchase consideration, estimated fair values and residual goodwill are as follows:

 
 Description 
 (in EUR millions, except where specified)        Amount 
                                                 -------- 
 Consideration to public shareholders pursuant 
  to the Scheme (in AUD)                            6,673 
 Consideration to TCCC (in AUD)                     2,265 
-----------------------------------------------  -------- 
 Total purchase consideration (in AUD)              8,938 
-----------------------------------------------  -------- 
 Total purchase consideration (in EUR)              5,766 
 
 Allocation of purchase consideration: 
 Net working capital (excluding inventory)            126 
 Inventory                                            385 
 Intangible assets                                  4,421 
 Property, Plant, and Equipment                     1,300 
 Other non-current assets                             132 
 Other non-current liabilities                    (1,422) 
 Fair value of noncontrolling interests             (312) 
 Deferred taxes, net                              (1,353) 
                                                 -------- 
 Residual goodwill                                  2,489 
 Less CCL's historical goodwill                      (80) 
-----------------------------------------------  -------- 
 Goodwill adjustment                                2,409 
-----------------------------------------------  -------- 
 

The preliminary allocation has been made based on limited access to information. CCEP will not have sufficient information to make final allocations until after the completion of the Acquisition.

The final determination of the accounting for the Acquisition is anticipated to be completed as soon as practicable after the completion of the Acquisition. CCEP anticipates that the valuations of the assets acquired and liabilities assumed in the Acquisition will include, but not be limited to, inventory, property, plant and equipment, intangible assets and borrowings. The valuations will consist of physical appraisals, discounted cash flow analyses or other appropriate valuation techniques to determine the fair value of the assets acquired and liabilities assumed.

The final consideration and amounts allocated to assets acquired and liabilities assumed in the Acquisition could differ materially from the preliminary amounts presented in the Pro Forma Financial Information. A decrease in the fair value of assets acquired or an increase in the fair value of liabilities assumed in the Acquisition from those preliminary valuations presented in the Pro Forma Financial Information would result in an increase in the amount of goodwill that will result from the Acquisition. In addition, if the value of the assets acquired is higher than the preliminary indication, it may result in higher amortization and depreciation expense than is presented in the Pro Forma Financial Information.

   (i)            Consideration 

The total cash consideration was translated from AUD to Euro using the 31 March 2021 exchange rate of 0.64516. The actual purchase consideration will be determined upon completion of the Acquisition.

   (ii)           Inventory 

The preliminary estimates of the fair value of inventory acquired is based on key assumptions and have been developed using publicly disclosed information for other acquisitions in the industry, CCEP's historical experience, data that were available in the public domain and CCEP's due diligence review of the business of CCL. These estimates will be finalized following completion of the Acquisition and additional values, if any, assigned to inventory.

The fair value of CCL inventory on hand has been estimated as EUR356 million, representing a fair value uplift related to finished goods inventory from their historical costs of EUR29 million which is expected to be recognized within cost of sales within the first year following the close of the transaction.

This adjustment has been tax affected using a blended statutory rate of 29% for the Pro Forma Income Statement.

   (iii)          Intangible assets 

The preliminary estimates of the intangible assets acquired are based on key assumptions and have been developed using publicly disclosed information for other acquisitions in the industry, CCEP's historical experience, data that were available in the public domain and CCEP's due diligence review of the business of CCL. These estimates will be finalized following completion of the Acquisition and additional values, if any, assigned to CCL customer relationships or other identifiable intangible assets acquired.

The fair value and weighted average estimated useful life of identifiable intangible assets are estimated as follows:

 
 Description 
 (in EUR millions)                           Fair value   Weighted-average estimated useful life   Annual amortization 
                                            -----------  ---------------------------------------  -------------------- 
 Distribution rights, brand names and 
 trademarks                                       3,902                 Indefinite                                   - 
 Other acquired identifiable intangible 
  assets                                            436                     20                                      22 
                                            ----------- 
 Total acquired identifiable intangible 
  assets (excluding software and other 
  intangibles)                                    4,338                                                             22 
                                                                                                  -------------------- 
 Less CCL's book value of intangible 
  assets (excluding software and other 
  intangibles)                                    (584) 
                                            ----------- 
 Adjustment to intangible assets, net             3,754 
                                            =========== 
 

Based on the estimated fair values of identified intangible assets and the weighted average useful lives, the following adjustment to amortization expense (recognized within administrative expense) and associated income tax adjustments have been included in the Pro Forma Income Statement:

 
 Description 
                                                                       Year ended 
                                                                       31 December 
 (in EUR millions)                                                        2020 
                                                                     ------------- 
 Amortization of identified intangible assets                                   22 
 Less: CCL's intangible amortization per 31 December 2020 accounts 
  (excluding software and other intangibles)                                   (1) 
                                                                     ------------- 
 Adjustment to amortization expense                                             21 
                                                                     ============= 
 

These adjustments have been tax affected using a blended statutory rate of 29% for the Pro Forma Income Statement.

   (iv)          Property, plant and equipment 

The preliminary estimates of the property, plant and equipment assets acquired are based on key assumptions and have been developed using publicly disclosed information for other acquisitions in the industry, CCEP's historical experience, data that were available in the public domain and CCEP's due diligence review of the business of CCL. These estimates will be finalized following completion of the Acquisition and additional values, if any, will be quantified.

The fair value and weighted average estimated remaining useful life of property, plant and equipment, excluding right of use assets, have been estimated as EUR1.03 billion (representing a fair value uplift of EUR94 million) and 7 years, respectively.

Based on the estimated fair values of property, plant and equipment, excluding right of use assets, and the weighted average remaining useful lives, an adjustment of EUR11 million has been recorded as an increase to depreciation expense.

These adjustments have been tax affected using a blended statutory rate of 29% for the Pro Forma Income Statement.

   (v)           Non-controlling interests 

The fair value of the non-controlling interest assumed represents the value recognized in CCL's 31 December 2020 consolidated balance sheet of EUR197 million increased by a fair value adjustment of EUR115 million to EUR312 million. This fair value adjustment represents the estimated enterprise value at the acquisition date that is attributable to non-controlling interests, inclusive of the associated deferred tax impact.

   (vi)          Deferred tax liabilities 

The total net deferred tax liability is estimated to be EUR1.35 billion, or a net increase of EUR1.21 billion. The net increase results from fair value adjustments related to intangible assets and property, plant and equipment discussed above.

   (b)   Transaction and related costs 

Reflects the accrual of non-recurring costs of EUR96 million related to the Acquisition, including, among others, fees paid for financial advisors, legal services, professional accounting services, and temporary financing related to the transaction. These costs are not reflected in the historical consolidated balance sheets of CCEP and CCL, but are reflected in the Pro Forma Statement of Financial Position, as a decrease to cash and cash equivalents and a corresponding decrease to retained earnings, and in the Pro Forma Income Statement for the year ended 31 December 2020, within operating expenses and finance costs as they will be expensed by CCEP and CCL as incurred. These costs are not expected to be incurred in any period beyond 12 months from the closing date of the Acquisition.

The adjustment to the Pro Forma Income Statement has been tax affected using a blended statutory rate of 29% for the Pro Forma Income Statement.

Note 4: Transaction related adjustments - financing

CCEP intends to borrow approximately EUR5.2 billion to fund the Acquisition. For purposes of this unaudited pro forma condensed combined financial information, CCEP has assumed that the new CCEP financing will consist of 4.7 billion Euro equivalent aggregate principal of Senior Notes, being a mix of Euro and USD denominated borrowings, and EUR500 million of short term financing of commercial paper. The USD denominated borrowings will be swapped into Euros using cross currency swaps. For the purposes hereof, the new funds raised are assumed to be used for the Acquisition and costs and expenses of the Acquisition. The amount and type of financing could be different from that presented in these pro forma condensed combined financial statements.

 
 Description 
 (in EUR millions)                         Amount 
 Proceeds from commercial paper program       500 
                                          ------- 
 Pro forma adjustment to current 
  portion of borrowings                       500 
 Proceeds from senior notes                 4,745 
 Less capitalised issuance costs             (24) 
                                          ------- 
 Pro forma adjustment to non-current 
  portion of borrowings                     4,721 
 
 Total borrowings                           5,240 
 Weighted average interest rate             0.60% 
                                          ------- 
 Pro forma annual interest expense             31 
 Pro forma annual amortization of 
  debt issuance costs                           3 
                                          ------- 
 Pro forma adjustment to finance 
  costs                                        34 
                                          ======= 
 

CONTACTS

 
 Company Secretariat   Investor Relations   Media Relations 
  Clare Wardle          Sarah Willett        Shanna Wendt 
  T +44 20 7355 8406    +44 7970 145 218     T +44 7976 595 168 
 

ABOUT CCEP

Coca-Cola European Partners plc is a leading consumer goods company in Western Europe, making, selling & distributing an extensive range of non-alcoholic ready to drink beverages & is the world's largest Coca-Cola bottler based on revenue. Coca-Cola European Partners serves a consumer population of over 300 million across Western Europe, including Andorra, Belgium, continental France, Germany, Great Britain, Iceland, Luxembourg, Monaco, the Netherlands, Norway, Portugal, Spain & Sweden. The Company is listed on Euronext Amsterdam, the New York Stock Exchange, London Stock Exchange & on the Spanish Stock Exchanges, trading under the symbol CCEP. For more information about CCEP, please visit www.cocacolaep.com & follow CCEP on Twitter at @CocaColaEP.

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