BELGRADE (Reuters) – Coca-Cola Co and Greek firm Coca-Cola Hellenic Bottling Co (CCHBC) have acquired 100 percent of Serbian water bottler Vlasinka for 21.5 million euros ($28.1 million), a Serbian government official said. Coca-Cola’s arrival in Serbia marks the second significant foreign investment in the water-bottling sector after UK-based hedge fund FPP Balkan Ltd last December acquired the leading domestic brand, Knjaz Milos, for around 54 million euros. «The value of the whole transaction is around 100 million euros ($130.6 million). That includes 21.5 million euros for the capital of Vlasinka and future development projects,» Privatization Minister Predrag Bubalo said at a news conference. The acquisition involves production facilities at Surdulica in southern Serbia and the mineral water brand Rosa. Fully owned by Simpo of Vranje, a furniture producer run by former Serbian deputy prime minister Dragan Tomic, Vlasinka in 1998 pioneered non-carbonated water bottling in Serbia, where all bottled water previously was carbonated. The money goes to one of the poorest regions in Serbia. «This is a vote of confidence in Serbian brands and products,» said Michael Holm Johansen, head of Atlanta-based Coca-Cola’s Southeast Europe and Gulf Division. «For us the alternative would have been to bring in an international water brand, but then we decided that expansion of our portfolio of brands would be better,» he added. Simpo officials said Rosa held a 9.0 percent share of the Serbian water market. The company now operates one bottling line for 30 million bottles a year, but with Coca-Cola stepping in, it plans to expand output to 300 million bottles. «Coca-Cola has won the race. Their competitors included Slovenian Mercator, Agrokor of Croatia and Serbia’s Delta Holding. Initially, Nestle was also interested, but we soon realized we were getting nowhere with them,» a company official, who asked not to be named, told Reuters. «This is a very good deal. Competition will now tighten because total installed water-bottling capacity is three times the consumption. There will be plenty of water for exports,» the official said. Sources familiar with the deal said the money was coming from Atlanta. The Greek company, which is 24 percent owned by Coca-Cola, would handle marketing. CCHBC downgrade According to a separate Reuters wire from Athens, in a research note dated February 18 Citigroup’s Smith Barney downgraded CCHBC to «sell» from «hold» on the back of an anticipated slower growth outlook. «The slower growth outlook leads to the reduction of our target price to 18.0 euros (previously 19.0 euros),» Smith Barney said in its research note, adding that it reduces its rating to «sell/medium risk» from «hold/medium risk.» Smith Barney said that «2005 should be a difficult year with raw material price increases hitting results by as much as 55-60 million euros – that should put EPS growth at about 4 percent, the lowest in five years.» «We reduce our EPS forecasts for 2005-06 by 10 percent and for 2007 by 5 percent,» it added. CCHBC is the world’s second-largest bottler of Coca Cola products by sales.