Coke to Buy JTL Bottling Operations for $1.4 Billion

Coca-Cola said Tuesday that it will spend about $1.4 billion to acquire the bottling operations of JTL Corp., the oldest and largest of the soft drink’s independent bottlers.

The purchase--the largest in Coke’s history--together with the bottling operations already owned by Coke and those it agreed to purchase June 16 from Beatrice Cos., will mean that the soft-drink maker will produce 31% of the all Coke sold in cans and bottles in the United States.

The company will also become the largest U.S. bottler of its own products since it first sold the rights to bottle Coke 87 years ago. Coca-Cola said it will explore the possibility of creating a new, publicly held Coca-Cola bottling company.

Invented in 1886

The agreement with JTL Corp. was signed by Chairman John T. Lupton, whose grandfather, also named John T. Lupton, together with two other Chattanooga, Tenn., businessmen--Benjamin Thomas and Joseph Whitehead--came up with the idea to bottle Coke. For the first 13 years after Coke was invented in 1886, it was sold only at the soda fountain.

In 1899, Lupton and the others purchased the national rights to sell Coca-Cola in bottles. Over the years, they sold territorial rights to other bottlers or to Coca-Cola Co., which purchased the last of those rights in the mid-1970s.

Emanuel Goldman, an analyst at Montgomery Securities in San Francisco, said the combined bottling operations will account for $2 billion, at wholesale, of all bottled and canned Coke sales.

Coke and Chattanooga-based JTL had been talking about a possible combination. They had reached a preliminary agreement on a merger in January, but the deal fell through.

Reopened Discussions

“After the recent talks with the Coca-Cola Co. about merging our respective Coca-Cola bottling properties were discontinued,” he said, “members of the Lupton family considered a number of alternatives and decided that the sale of our bottling interests in the Coca-Cola Co. best accomplished our objectives. We asked that discussions be reopened and are pleased that this letter of intent is the result.”

Meanwhile, Coca-Cola agreed to acquire Beatrice’s bottling operations, which includes plants in Los Angeles and San Diego, for $1 billion.

Under terms of the deal, which is subject to approval by Coke’s directors, Coca-Cola will pay JTL, which is owned and controlled by Lupton and his family, approximately $1.4 billion, less an undisclosed amount of assumed debt. JTL has plants in Arizona, Colorado, Texas and Florida.

Over the last six years, Coke has participated in the exchange of ownership of well over 60% of Coca-Cola’s domestic bottling business.

A spokesman said the company embarked on a conscious and specific program aimed at making certain that the bottling operations were in “the strongest and most aggressive hands.”

Coke at times has acted as broker to find prospective buyers, as banker to serve as source of funds, or has temporarily purchased some bottling operations and resold them. Today there are 250 different ownership groups that operate 400 bottling plants in the United States.