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PepsiCo moves to control Pepsi Bottling Group and PepsiAmericas
PepsiCo has launched an acquisition move to buy the outstanding shares in The Pepsi Bottling Group (PBG) and PepsiAmericas.
PepsiCo has proposed to acquire all of the outstanding shares of common stock it does not already own in its two largest anchor bottlers, The Pepsi Bottling Group (PBG) and PepsiAmericas (PAS), at a value of $29.50 per share for The Pepsi Bottling Group and $23.27 per share for PepsiAmericas.
This represents a premium of 17.1 percent over the closing price of the common stock of each company on 17 April 2009. Compared to the 30-day average closing prices, the offer prices represent a premium of 36 percent for PBG and 33.4 percent for PAS. PepsiCo currently owns 33% of the outstanding shares of PBG and 43% of the outstanding shares of PAS.
The total value of the shares PepsiCo is proposing to acquire is approximately $6 billion. The transaction is expected to be accretive to PepsiCo’s earnings by at least 15 cents per share when synergies are fully realized.
If completed, the acquisitions would create a leaner, more agile business model and provide a stronger foundation for PepsiCo’s future growth. Upon acquiring the outstanding shares of the two bottlers, PepsiCo would handle distribution of about 80 percent of its total North American beverage volume, including both its direct-store-delivery and warehouse systems.
“Our operating environment has evolved dramatically in the last decade,” said PepsiCo’s chairman and CEO Indra Nooyi. “Retailers have continued to consolidate. New competitors have emerged. And non-carbonated drinks, which have different economics and different distribution systems than carbonated soft drinks, have become a much bigger factor in the industry and in our own portfolio. We believe that by reshaping our business model we can significantly improve our competitiveness and our growth prospects.
“Consolidating the bottling businesses with our franchise company would create many benefits. We could unlock significant cost synergies, improve the speed of decision making and increase our strategic flexibility. We would be able to present a more unified face to our retail and food service customers, which would better position us to provide customised solutions, as we do at Frito-Lay, and to take to a new level our ‘Power of One’ programme of bundled food and beverage offerings.”
A combination would create “a fully-integrated supply chain and go-to-market business model positioned to accelerate revenue growth”, PepsiCo said, while the company is targeting synergies of around $200m per year pre-tax.
Upon acquiring the shares, PepsiCo would handle distribution of about 80% of its total North American beverage volume, including both its direct-store-delivery and warehouse systems.
In confirming its reception of PepsiCo’s offer, PepsiAmericas said its board “will review the proposal carefully and determine the appropriate response in due course”.
Source: PepsiCo
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