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PepsiCo sues Pepsi Bottling Group
PepsiCo’s buyout bid for its two largest bottlers took a dramatic turn this week when it filed a law suit against one of the companies over the way it rejected the deal and approved shareholder rights measures.
PepsiCo contends that the Pepsi Bottling Group didn’t give proper notice of the meeting, where the bulk of the bottler’s board voted to reject the offer and approved a shareholder rights plan – known as a ‘poison pill’ – used to attempt to hold off hostile takeover attempts by making it more expensive for a suitor to acquire shares.
This is PepsiCo’s first official move since Pepsi Bottling and PepsiAmericas announced that they were to reject PepsiCo’s proposed $6bn bid, on the grounds that the bid undervalued them.
In a statement, Pepsi Bottling said that the lawsuit is just a tactical move. “PepsiCo has filed a lawsuit that is entirely without merit in an attempt to divert attention from its grossly inadequate proposal,” the company said.
Some analysts have said the deal is likely to go through if PepsiCo offers more money, but in a statement, PepsiCo said it believes the price is fair.
PepsiCo is asking the court to “remove the roadblocks to a potential transaction” by ruling that the actions at certain Pepsi Bottling meetings are not valid, that the bottlers have breached their duties to shareholders, and that PepsiCo executives who sit on Pepsi Bottling’s board be notified of meetings.
In the lawsuit, PepsiCo states that its two executives on Pepsi Bottling’s board of directors were not notified of certain board meetings after the offer was announced in April, making actions taken at those meetings invalid. It also argues that because other topics, chiefly the poison pill, were covered, the two other board members should have been notified.
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