 
Looking to reshape its business model to better compete in a changing beverage market, PepsiCo Inc. has made a $6 billion bid to acquire its two largest bottlers, including The Pepsi Bottling Group (PBG), the Somers-based company spun off from PepsiCo a decade ago.
The Purchase-based beverage giant proposed last week to acquire all outstanding shares of common stock in PBG and PepsiAmericas Inc. (PAS), based in Minneapolis, Minn. The company currently holds a 33 percent stake in Pepsi Bottling Group and a 43 percent stake in PepsiAmericas.
PepsiCo offered $29.50 per share for The Pepsi Bottling Group and $23.27 per share for PepsiAmericas, a premium of 17.1 percent over the closing price of each bottler”™s common stock on April 17. 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 officials said.
The offers consist of $14.75 in cash plus 0.283 shares of PepsiCo common stock for each share of PBG and $11.64 in cash plus 0.223 shares of PepsiCo common stock for each share of PAS.
Once in place, the merger is expected to add at least 15 cents per share to PepsiCo”™s earnings. PepsiCo officials said the consolidation would create annual pre-tax benefits estimated at more than $200 million, primarily by reducing redundant costs, achieving greater scale efficiencies and realizing new revenue opportunities.
The deal would give PepsiCo control of distribution of about 80 percent of its total North American beverage volume, including both its direct-store-delivery and warehouse systems. If completed, the acquisitions would create a leaner, more agile business model and provide a stronger foundation for PepsiCo”™s future growth.
“Our operating environment has evolved dramatically in the last decade,” PepsiCo Chairman and CEO Indra Nooyi said in a statement announcing the acquisition bid. “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.”
Pepsi Bottling Group last week said its board of directors is evaluating the purchase proposal.
The PepsiCo Americas Beverages Division reported a 6 percent first-quarter decline in sales volume compared to a year ago. The division”™s net revenue declined 9 percent and core operating profit was down 10 percent from the first quarter of 2008.
One of the world”™s largest food and beverage companies, PepsiCo had annual revenues of more than $43 billion in 2008. The company employs approximately 198,000 people worldwide and has about 2,100 employees in Westchester.
The Pepsi Bottling Group last week reported first-quarter net income of $57 million, or 27 cents in diluted earnings per share. The company reported net income of $28 million, or 12 cents per diluted share, in the first quarter of 2008.
PBG is the world”™s largest manufacturer, seller and distributor of Pepsi-Cola beverages, with approximately 67,000 employees and annual sales of nearly $14 billion. The company employs about 1,100 workers at its Somers headquarters.
Westchester County and Empire State Development Corp. officials have been working to keep the bottler in Somers when its office lease expires in 2010. The company reportedly has been offered an approximately $30 million incentive package from Connecticut economic development officials to relocate there.
