Coke to Buy Niche Drink Company Odwalla

Tuesday October 30, 11:40 AM EST

By Paul Simao

ATLANTA, Oct 30 (Reuters) - Coca-Cola Co. (KO) on Tuesday said it will
acquire U.S. beverage company Odwalla Inc. (ODWA) for $181 million in a
deal that strengthens its presence in the fast-growing non-carbonated premium drink
market.

Coca-Cola, the world's No. 1 soft drink company, will offer $15.25 a share
for Half Moon Bay, California-based Odwalla, whose products include the
Odwalla and Samantha lines of fresh fruit and vegetable juices, dairy-free shakes,
smoothies and spring water.

Shares of Odwalla, which closed at $11.83 a share on Monday on the Nasdaq
stock exchange, jumped $3.29, or 27.8 percent, to $15.12 in midday trade on
Tuesday. Coca-Cola fell 91 cents, or 1.9 percent, to $47.70 on the New York
Stock Exchange.

Analysts said Coke's proposed acquisition was fueled by the company's
growing focus on niche beverages. Odwalla products are sold in about
5,000 supermarkets, natural food stores, convenience stores and other
retail outlets across the nation.

"It shows that Coke is interested in getting into new areas of the beverage
business aggressively," said John Sicher, editor of Beverage Digest, a
leading beverage industry newsletter.

"The premium refrigerated juices are still a very small category but poised
to get much bigger," said Sicher, who added that Atlanta-based Coca-Cola
might be in acquisition talks with one or two other companies.

An acquisition of Odwalla would add to a string of recent deals put
together by the soft-drink giant. In the past year, the soft drink giant has
acquired Planet Java, a maker of coffee drinks, and Mad River Traders Inc.,
which distributes New Age teas, juices, lemonades and sodas.

Some analysts believe that Coca-Cola's acquisitions are a response to a
flurry of deals that appear to have given its Purchase, New York-based
archrival PepsiCo Inc. (PEP) a leg up in the market.

Last year, PepsiCo paid an estimated $370 million to scoop up a majority
stake in South Beach Beverage Co. and control over the popular SoBe line
of herb-spiked fruit, energy and tea drinks.

PepsiCo also acquired the prized Gatorade sports drink through a recently
completed $13 billion acquisition of Quaker Oats Co. Shares of Pepsi rose 28
cents to $48.43 on the NYSE.

Coca-Cola, which noted that 57 percent of Odwalla's shareholders already had
committed themselves to its tender offer, said the company would become a
separate business unit of its Minute Maid Co. juice division.

Odwalla's current management team, including Chief Executive Officer Stephen
Williamson, will remain in place.

"The innovation and expertise of the Odwalla team coupled with our innovation
and logistics network are key to expanding the brands they have created and
nurtured," said Don Short, president and chief executive officer of
Minute Maid.

The acquisition is expected to be neutral to Coca-Cola's earnings in the
first year after the acquisition, but boost results from the second year onward,
according to the two companies.