Coke Buys Glaceau

25 May

Coke buying Vitaminwater parent

Coca-Cola will acquire Energy Brands for $4.1 billion. Nasdaq agrees to buy Sweden’s stock exchange after losing its bid for the London Stock Exchange earlier this year. Existing-home sales drop to a four-year low.

What do soda and vitamins have in common?

Coca-Cola (KO, news, msgs) thinks a lot. The beverage giant said today that it will buy Energy Brands, also known as Glacéau, the maker of the popular Vitaminwater, in a deal worth $4.1 billion in cash.

Shares of Coke rose 70 cents to $51.94 on the news.

The move will allow Coke "to grow its active-lifestyle beverages," a news release stated, and CEO Neville Isdell said the deal will help boost the company’s market share. "We envision even faster growth for Glacéau as part of Coca-Cola’s enhanced range of brands for North American customers and consumers."

Stocks were moving higher by midday, after big losses yesterday. At 12:25 p.m. ET, the Dow Jones Industrial Average was up 22 points to 13,463. The Nasdaq Composite Index had gained 12 points to 2,550, and the Standard & Poor’s 500 Index was up 4 points at 1,511.

Coca-Cola’s soda products make up 80% of its sales, while rival PepsiCo (PEP, news, msgs) relies on soda for less than 20% of its sales.

"We look at this as a play for the future," Coke President Muhtar Kent told CNBC this morning. "We see great opportunity for these growth categories."

Coke has been working to expand its line of noncarbonated beverages and healthier drinks. It acquired Fuze Beverage, which makes juices and teas, in March, and recently introduced Diet Coke Plus, a nutrient-enriched soda.

"This is the position Coke’s in, having to pay up because there are so few assets out there that can move the needle for them," Greenwood Capital Management money manager Walter Todd told Bloomberg News. "Coke needs Glacéau."

Pepsi bought Naked Juice in November to add to its range of healthier products. It bought Gatorade parent Quaker Oats in 2001, after Coca-Cola nixed a deal.

‘I’ll take trans-fat-free fries with that’

The soda giants aren’t the only corporate giants on a health kick.

It looks like fast-food chain McDonald’s (MCD, news, msgs) is getting on the wellness train, too.

McDonald’s said at its annual shareholders meeting yesterday that all of its restaurants will switch to cooking their French fries and other foods in trans-fat-free oil by the end of the year.

The company is already selling fries in the new, healthier oil at 3,500 of its 13,800 restaurants in the U.S.

Existing-home sales hit 4-year low

There was more disappointing news on housing today.

The National Association of Realtors said sales of existing homes in the U.S. fell 2.6% to an annual rate of 5.99 million in April, the slowest pace in four years.

Economists had expected a decline of 0.2% to 6.11 million units.

The supply of existing homes on the market rose 10.4% to 4.2 million, or an 8.4-month supply — the highest level since April 1992.

This follows a much more upbeat report yesterday from the Commerce Department that said new-home sales had risen unexpectedly in April, up 16% from March.

Gap’s profit slides

The Gap’s (GPS, news, msgs) profit dropped 26% in the first quarter, the retailer reported yesterday. Net income fell to $178 million, or 22 cents per share, from $242 million, or 28 cents per share, in last year’s opening quarter.

Analysts had been looking for earnings of 24 cents per share. Nevertheless, Gap shares rose 28 cents to $18.57 by midday.

 The company said price reductions at its stores had hurt sales in the quarter.

The Gap has been looking for a CEO to replace Paul Pressler, who was forced out in January amid dismal sales and a slumping stock price. Bob Fisher has been filling in as interim chief.

The retailer is "actively working to fix our core business, retain and recruit talent, and streamline operations so that our organization can be more nimble and efficient," Fisher said in a prepared statement.

Nasdaq to buy European exchange

The Nasdaq Stock Market (NDAQ, news, msgs) said today that it will buy Swedish exchange OMX Group for $3.7 billion.

The exchange — Europe’s fifth-largest — is home to Scandinavian companies such as Volvo (VOLV, news, msgs) and Nokia (NOK, news, msgs).

The move will follow the completion of rival NYSE Group’s (NYX, news, msgs) $14 billion acquisition of Euronext last month.

Nasdaq tried unsuccessfully to buy the London Stock Exchange Group (LSE, news, msgs) earlier this year and has been trying to make a trans-Atlantic acquisition for more than a year.

The new company will be called Nasdaq OMX.

Capt. Jack Sparrow is back

Memorial Day weekend means the unofficial start to summer, with rising gas prices and blockbuster movie openings.

Walt Disney (DIS, news, msgs) is banking on good old Capt. Jack Sparrow to charm viewers this holiday weekend, and executives are keeping their fingers crossed that the lovable pirate will outdo a superhero and a cartoon ogre to produce the No. 1 movie debut on record.

Disney’s "Pirates of the Caribbean: At World’s End" comes out this weekend, debuting at a record 4,362 movie screens, according to box-office tracker Media By Numbers. Earlier this month, Sony’s (SNE, news, msgs) "Spider-Man 3" took in $151.1 million on its opening weekend, topping last year’s "Pirates of the Caribbean: Dead Man’s Chest," which had brought in $135.6 million.

DreamWorks Animation’s (DWA, news, msgs) "Shrek the Third" debuted last weekend and rung in $122 million, making it the best debut for an animated film and the third-biggest ever.

Thirty years ago today, the mother of all summer blockbusters, "Star Wars," made its debut.

That film, which also ushered in the era of licensed movie merchandise, earned $1.6 million on its opening weekend in 1977 and sent its studio’s stock price soaring. Within three weeks, shares of 20th Century Fox had doubled to hit a record, according to the Internet Movie Database.

When "Star Wars" was re-released in theaters in 1997, it made more than $36 million on over 2,000 screens on its opening weekend.

Worse off than your dad?

Men in their 30s in the U.S. are worse off than their fathers were just 10 years ago, a study released today says.

"There has been no progress at all for the youngest generation. As a group, they have on average 12% less income than their fathers’ generation at the same age," the study says.

The median income for an American man in his 30s was about $35,000 in 2004, 12% lower than the median income for a man in his 30s in 1974, which was the equivalent of $40,000 in today’s dollars.

"Income in one’s thirties is a reasonably good indicator of what one’s lifetime income will be," the report says.

The study was done by researchers from the Pew Charitable Trusts, The Brookings Institute, the Heritage Foundation, the American Enterprise Institute and the Urban Institute.

By Elizabeth StrottAdd to Technorati Favorites

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Posted by on May 25, 2007 in Business


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