Goldman Sachs Comments On Coca Cola Enterprises Potential Germany Deal

Investors are increasingly focused on Coca Cola Enterprises CCE option to buy the German bottling operation from Coca Cola Company KO, set at 18-39 months after KO's acquisition of CCE's North American operation was originally announced in February 2010. Goldman expects to hear more detail around the likelihood of an acquisition over the course of 2011 and have conducted a scenario analysis to assess the strategic and financial implication for CCE of this possibility. Goldman is raising its PT to $30 reflect the potential balance sheet optionality discussed in this report. The acquisition should depend on visible path to top- and bottom-line growth. Germany's competitive hard discounter environment, lower profit margins, and lower relative market share versus other markets suggest that CCE management would need to see a clear path to profit growth before agreeing to a potential deal. Goldman believes CCE management would require a full commitment from KO on stepped up marketing in Germany and visibility on further cost structure improvement before any deal. Goldman Sachs has a Buy rating and $30 PT on CCE CCE is trading higher at $25.96