Korean Coca-Cola unions declare opposition to possible buyout by CVC Capital Partners, threaten industrial action
In a press release issued on the morning of April 27, the three unions representing workers in Coca-Cola Korea Bottling Company (CCKBC) North, Southwest & Southeast announced their opposition to the sale of the CCKBC to a private-equity fund, CVC Capital Partners. The three unions, affiliated to the IUF, have made it clear that they will oppose such a sale under any conditions. In their press statement the unions assert that, “there is no possibility that we will accept CVC (a private equity fund), which has submitted a letter of intent to buy CCKBC. We will never accept CVC owning CCKBC even if CVC agrees to guarantee union demands. We three unions are planning to demand that CVC should be excluded from the bidders.”
According to recent media reports Coca-Cola Amatil (CCA), which owns CCKBC, has received several letters of intent by potential buyers, including a joint bid by CVC Capital Partners and Woongjin Foods.
The reason for rejecting a private equity buyout is clear. A leveraged buyout by a private equity fund would inevitably undermine employment security, since the buyout would be financed with loans secured against CCKBC’s assets and so would burden the company with more debt. This debt burdern would increase under the practice of dividend recaps (getting CCKBC to borrow money that would then paid out as a special dividend to the private equity fund), plus the extraordinarily high fees charged by private equity firms to ‘advise’ on the buyout. Faced with an increased debt burden, workers would face increased pressures of restructuring and cost-cutting.
Increased debt, restructuring and a short-term drive to drain the company of cash casts doubt on the viability of any “guarantees” regarding wages & benefits, employment security, and trade union rights.
So the CCKBC unions have sent a clear warning: “We three unions emphasize again that we strongly oppose the acquisition of CCKBC by the CVC private equity fund and that CCA must accept unions’ demands and negotiate with unions faithfully. We three unions are giving CCA a warning: CCA will bear the blame for any situation that might occur should CCA intend to refuse union demands.”