General Cinema To Sell Bottling Unit

From Inquirer Wire Services
Posted: December 02, 1988

General Cinema Corp. plans to sell its Pepsi-Cola bottling subsidiary to PepsiCo Inc. for $1.5 billion in notes by the end of this month, the companies announced yesterday.

The sale would be virtually tax-free until the principal is retired in a single payment in 20 years because, for tax purposes, it will be treated as an installment purchase, said Peter Farwell, spokesman for General Cinema of Chestnut Hill, Mass.

"We have built and managed one of the most profitable soft-drink bottling operations in the industry," said Richard Smith, General Cinema's chairman and chief executive. "Today, we're taking advantage of an excellent opportunity to enhance shareholder value."

General Cinema Beverages, the second-largest independent Pepsi bottler, operates in Ohio, Indiana, Georgia, California, Florida, West Virginia, Virginia, North Carolina and the District of Columbia, accounting for 8.5 percent of PepsiCo's U.S. production.

With General Cinema Beverage, PepsiCo would control about 48.5 percent of its own production, according to PepsiCo of Purchase, N.Y.

PepsiCo, the nation's second-largest soft-drink maker, has no plans for further purchases, said James F. Griffith, spokesman for PepsiCo, but "we know the bottling business. We like it and when we have the opportunity to acquire independent bottlers . . . we take advantage."

A General Cinema statement said the deal would result in a pre-tax gain of about $1.2 billion for financial reporting purposes. The company said that, as an installment payment, the sale would create no tax liability until the principal is paid.

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