In an announcement made on June 28, the family-owned conglomerate revealed its intention to sell its US-based beverage production company, Swire Coca-Cola, to its controlling shareholder, John Swire & Sons, for $3.9 billion. This substantial injection of funds will contribute to a reduction of over one-third of the company's existing debt.

Upon completion of the transaction, Swire Pacific plans to allocate approximately half of the proceeds towards proposing a special dividend payment with a total value of HKD 11.7 billion ($1.5 billion).

Remarkably, this deal comes just one day after the wealthy Cheng family and the family flagship firms Chow Tai Fook Jewellery conglomerate announced an agreement worth $4.5 billion, aimed at acquiring a subsidiary of New World Development, a prominent Hong Kong-based construction group burdened by substantial debt.

According to Bloomberg, soaring global borrowing costs have placed significant strain on numerous companies, impairing their ability to meet debt obligations.

In Hong Kong, where interest rates have been substantially impacted by US monetary policies due to the Hong Kong dollar's peg to the US dollar, interbank borrowing costs have skyrocketed to 5 per cent, marking a fivefold increase since the previous month when rates were below 1 per cent.

The prevailing downturn in the real estate market has further exacerbated economic pressures on property companies, necessitating continuous price reductions and the inclusion of incentives to stimulate home sales.

Swire Pacific, being one of Hong Kong's largest real estate developers and the owner of Cathay Pacific Airways, has experienced a sharp decline in profits since the implementation of pandemic containment measures. In light of the prevailing challenging financial market conditions, the conglomerate finds itself grappling with mounting difficulties.

Since the beginning of this year, shares of Swire Pacific listed on the Hong Kong stock exchange have collectively depreciated by 16 per cent. However, the stock experienced a minor recovery following the announcement of Swire's asset sale aimed at reducing debt.

In a significant development last year, Swire Pacific acquired the Vietnam and Cambodia branches of Coca-Cola for approximately $128 million), as part of its strategic expansion into the Southeast Asian beverage market.

Swire Coca-Cola ranks as the fifth-largest bottling partner of Coca-Cola in terms of production volume. Swire Coca-Cola exclusively handles the production, marketing, and distribution of Coca-Cola products in 11 provinces and cities in China, Hong Kong, Taiwan, Cambodia, Vietnam, and 13 states in the United States.

By divesting Swire Coca-Cola in the United States, the company reinforces its strategic focus on the mainland Chinese and Southeast Asian markets.

In January 2023, Swire Coca-Cola Ltd., a wholly-owned subsidiary of Swire Pacific Ltd., completed the acquisition of Coca-Cola Beverages Vietnam Ltd., the Coca-Cola bottling subsidiary in Vietnam.

This strategic move signifies yet another significant investment by Swire Coca-Cola in Southeast Asia, following its acquisition of Cambodia Beverage Co., Ltd. in November 2022.

With the completion of this deal, Swire Coca-Cola now owns and operates three beverage production facilities, 18 production lines, and six distribution centres across Vietnam. The company boasts a workforce of over 3,500 employees, both direct and indirect.

While the specific financial details of the transaction have not been officially disclosed, market rumours suggest that the Hong Kong-based conglomerate offered a staggering $1 billion for Coca-Cola's bottling operations in Vietnam and Cambodia.