Three of Europes main bottlers of Coca-Cola products are to combine in a $27bn deal to simplify manufacturing at the worlds largest drink maker. CocaCola Enterprises (CCE), the US-based bottler with exclusive Coke licences in several western Europe countries, will merge with its Iberian and German counterparts in the latest consolidation of the Coca-Cola Companys supply chain. The three-way merger announced on Thursday is one of the biggest consumer deals ever in Europe, and will create a company with revenues exceeding $12.5bn to be headquartered in London. The deal is structured as a tax inversion, allowing CCE to reduce its exposure to US taxes and creating a new UK-domiciled company called Coca-Cola European Partners whose stock will trade in Amsterdam, New York and Madrid. The new company aims to achieve annual pre-tax synergies of $375m within three years after the deal closes. The new companys effective tax rate is expected to be 28% following the completion of the deal. CCE will own 48% of the newly formed company. At closing, CCE shareowners will receive, for each CCE share held, one share of Coca-Cola European Partners and a one-time cash payment of $14.50 per share. The aggregate one-time cash payment of $3.3 billion will be funded by the new company using newly issued debt. Coca-Cola Iberian Partners, which was formed in 2013 after the merger of eight bottlers in Spain and Portugal, will own 34% of the combined business. The Coca-Cola Company will own the remaining 18% of the new group via its 100% ownership of the German bottler that is part of the merger.

You may assume that the standalone value of CCEs equity is $10.3 billion (which corresponds to CCEs market capitalization prior to rumours about the deal being announced in the press). CCEs stock also earned abnormal returns of approximately 17% between the day 3 before rumours regarding the deal were first made public and the day following the merger announcement. Coca-Cola Iberian Partners is a private company. You do not need to know anything else about Coca-Cola, Coca-Cola Iberian Partners, or CCE to answer this question.

QUESTION: CCE is effectively being acquired by the new entity (Coca-Cola European Partners). If the deal is completed, CCE shareholders will receive a cash payment of $3.3 billion plus a 48% equity stake in the new company. Suppose that the market value of CCE following the deal announcement accurately reflects the expected value of CCEs stake in Coca-Cola European Partners. Please also assume (for now) that the deal will be completed with certainty. Based on the information given to you in the question, what is the implied equity value of Coca-Cola European Partners?