Coca-Cola to buy Glaceau for $4.1 billion in cash

Coca-Cola is betting big that Glaceau will help expand its water and energy drink offerings and jump-start North American sales.

On Friday, the world’s largest beverage maker said it would buy the maker of Vitaminwater for $4.1 billion in cash. Coca-Cola executives said the price tag, which is nearly twice what Glaceau’s estimated value was less than a year ago and represents Coke’s largest acquisition ever, was worth it.

“We’re looking at this as a long-term opportunity,” Chief Operating Officer Muhtar Kent said.

Coca-Cola shares rose 65 cents to $51.89.

The acquisition will be financed with debt and is expected to add to Coca-Cola Co.’s earnings starting in 2008, but it will slightly dilute profit this year, executives said.

Coca-Cola’s chief financial officer, Gary Fayard, said Coke would take full ownership of Glaceau. For now, it is 30% owned by Tata Group, an India-based conglomerate with interests in steel, software services, hotels, chemicals and other industries.

The purchase of Glaceau, also known as Energy Brands Inc., could reduce Coca-Cola’s financial flexibility to buy back its own shares. Coca-Cola had said it would buy $2.5 billion to $3 billion of its stock this year. The company now expects to repurchase at least $1.75 billion to $2 billion in shares in 2007.

Glaceau, based in Whitestone, N.Y., is the maker of Vitaminwater, Fruitwater, Smartwater and Vitaminenergy.