I read through the explanatory memorandum that came out on 16/12/2014 regarding this deal with TCCC and CCAI today. It's definitely worth flicking through. A lot of the points you bring up are covered really well. CCA looked at all these different options including selling off CCAI completely and focusing just on ANZ, funding expansion of CCAI from a debt raising, funding from an equity raising and getting funding from TCCC. It gives a really clear explanation of the pros and cons for each.
In the end, the deal with TCCC was chosen as the best because it more closely aligns the interests of TCCC with CCAI, so they will be able to utilise TCCC's considerable experience in emerging markets. They have entered into a joint economic agreement which effectively means that CCAI will get a very good deal on concentrate pricing, allowing them to compete with other low cost providers in Indonesia to build market share. The TCCC deal also preserves the balance sheet strength of CCA which will allow them to do things in Australia such as balance sheet management or reinvestment into new growth strategies. Basically CCA gets to retain flexibility.
I completely understand what you are saying regarding funding from divs. They mention that the capacity to do this is there, however to do this without taking on too much risk would mean pushing out the expansion program over a longer time period. They argue that responding slowly like this may see them lose even more market share in Indonesia in the meantime.
It all seems very well considered and fair to me.
Interestingly TCCC are restricted from selling out of CCAI until CCAI has met a set of goals relating to EBIT margins and market share, plus a few other things. This means TCCC can't just bail if things aren't going well....and if things do start going well and they still want to get out, CCA get the first option to buy the position back. That seems like a good deal to me.
It also clearly explains why they haven't been doing well in Indonesia and why they expect that this investment will help them do better. There is a stack of information in it so I will try read over it again and pull out some more specific information to post over the next few days.
CCL Price at posting:
$9.72 Sentiment: Buy Disclosure: Held
