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Pattaya Daily News

16 February 2011 :: 11:02:45 am 50294

SSC-Pepsi Deal Hangs In Balance

Serm Suk Plc (SSC), the local bottler of Pepsi, may terminate its agreement with PepsiCo if the US beverage giant rejects its demand for the right to produce other brands of carbonated drinks.
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BANGKOK, Feb 16 – Contract termination would be the worst-case scenario if negotiations between SSC and PepsiCo fail to reach a settlement in the next 15 days.

SSC shareholders yesterday approved its proposal regarding amendments of its exclusive bottling agreement with PepsiCo and a change of control in the company.

The Stock Exchange of Thailand suspended trading in SSC shares yesterday at the company’s request pending the outcome of the meeting.

SSC is asking for independence to produce and distribute other carbonated soft drink products that are not in the same category as Pepsi.

For its part, PepsiCo can terminate the bottling contract with SSC if there is any change of control in the local company, but it cannot seek any charge or compensation for liquidated damages from SSC.

SSC asked PepsiCo to cut its cola concentrate prices by 9% annually.

PepsiCo is required to respond within 15 days. If a final agreement is not reached, SSC may terminate its bottling contract and the separation would be complete within 12 months.

PepsiCo holds a 41.54% stake in SSC through its subsidiaries Pepsi-Cola (Thai) Trading and Seven-up Nederland BV. SS National Logistics is the second-largest shareholder with 32% acquired in a tender offer late last year.

It has been speculated that the liquor and property billionaire Charoen Sirivadhanabhakdi, a longtime friend of Somchai Bulsook, the president and CEO of Serm Suk, is behind SS National Logistics. He is said to be helping Mr Somchai save SSC from any takeover attempt by PepsiCo in the future.

The shareholding dispute between SSC and PepsiCo started last April when the US beverage giant tendered for more shares in the Thai bottler. The offer failed as shareholders said the price was too low.

SSC has five bottling plants: Pathum Thani, Nakhon Sawan, Chon Buri, Nakhon Ratchasima and Surat Thani.

It also has 47 distribution centres, nine sub-warehouses and 1,400 trucks, which deliver products to more than 300,000 outlets.

Sales of SSC reached 20 billion baht last year, of which 70% or 15 billion baht came from Pepsi. But it contributed a small profit margin of 2-3%.

“The limitations of the current contracts with PepsiCo prevent SSC from fully utilising its manufacturing and distribution network, and its business potential,” said Vararatana Jutimitta, managing director of Bualuang Securities, the financial adviser to Serm Suk.

He noted the carbonated soft drink business of SSC had grown at a single-digit rate per year, lower than that of non-carbonated drinks such as its Crystal drinking water brand, which had 17.5% growth in sales last year. It also distributes Oishi green tea and Carabao Dang, which grew 22.3% and 13.4% respectively.

“Serm Suk should produce non-carbonated drinks and other products such as foods and snacks to utilise its distribution network,” said Mr Vararatana.

Mr Somchai, 68, said SSC had already spent 200 million baht to buy a 56-rai site in Rojana Industrial Estate in Ayutthaya for a new bottling plant for carbonated and non-carbonated beverages.

Report by: www.bangkokpost.com

Photo : Internet   Category : Business News

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