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Second, Cadbury had the contractual right to disapprove any
sale of Bottlers’ franchise rights. Cadbury insisted the
franchise rights be sold only to Coke or Pepsi so that Cadbury
products would be placed in Coke or Pepsi vending machines.
Third, buying the bottling facilities would cause friction
with Bottlers’ limited partners. Around 1989, Bottlers replaced
some of its original LBO financing by selling equity interests in
a limited partnership to approximately 50 independent investors.
The limited partners and the management group had different views
on how to run Bottlers. The limited partners wanted an early
high return, while the management group emphasized long-term
growth. These divergent views led to many heated communications,
threats, and a proxy fight.
The management group decided, given these internal and
external business reasons, that it was best to lease the
facilities rather than own them outright. The management group
wanted a third party to buy the bottling facilities from CPA7,
assume the lease, and then renegotiate the lease to remove the
rent escalators.
A Buyer
Bottlers identified G&K Properties, Inc. (G&K) as a
potential buyer that would lease the facilities to Bottlers on
renegotiated (and more favorable) terms. G&K was an unrelated
Iowa real estate development company with which Bottlers had
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Last modified: May 25, 2011