PepsiCo to Acquire Pepsi Bottling Group
Their first purchase bid rejected last spring, PepsiCo Inc. officials this week said the Purchase-based company has agreed to pay about $7.8 billion in cash and stock shares to acquire the Somers-based Pepsi Bottling Group Inc. (PBG) and its other anchor North American bottler, PepsiAmericas Inc. in Minneapolis, Minn.
The merger will consolidate 80 percent of the company”™s North American beverage volume and create one of the largest food and beverage companies in the world.
After spurning a $6 billion purchase bid in April as “grossly inadequate,” PBG”™s board of directors and the PepsiAmericas board accepted PepsiCo”™s higher offer for all outstanding shares of common stock it does not already own in the companies.
Pepsi Bottling Group shareholders can opt to receive either $36.50 in cash or 0.6432 shares of PepsiCo common stock, prorated so that the total payment will be half in cash and half in PepsiCo common stock. Pepsi Americas shareholders will receive either $28.50 in cash or 0.5022 shares of PepsiCo stock.
PepsiCo currently has a 33 percent stake in PBG and a 43 percent stake in PepsiAmericas.
The merger is expected to create $300 million annually in pre-tax benefits for PepsiCo by 2012, largely from greater cost efficiency and improved revenue opportunities, and increase company earnings by about 15 cents per share in three years.
In a statement announcing the acquisitions, PepsiCo Chairman and CEO Indra Nooyi said, “The changing dynamics of the North American liquid refreshment beverage business demand that we create a more flexible, efficient and competitive system that can drive growth across the full range of PepsiCo beverage brands.” The merger “will enable us to bring innovative products and packages to market faster, streamline our manufacturing and distribution systems and react more quickly to changes in the marketplace, much like we do with our food business.”
PepsiCo was second to Coca-Cola Co. in U.S. soft drink and energy drink sales in 2008 with a 30.8 percent market share. Its national sales volume last year dropped 4 percent from 2007, according to the Beverage Digest in Bedford Hills.
Pepsi Bottling Group Chairman and CEO Eric Foss said the deal “represents full and fair value” for his company and offers “new and expanded opportunities for PBG employees.”
“Ultimately, the transaction positions the entire Pepsi system to continue to win in the marketplace,” Foss said.
The acquisitions require the approvals of regulatory agencies and PBG and PepsiAmericas stockholders.
PepsiCo employs about 2,000 people at its Purchase headquarters. Pepsi Bottling Group, which was spun off from PepsiCo 10 years ago, has about 1,000 employees at its Somers headquarters.
Asked about the merger”™s impact on employment in Westchester and PBG”™s pending decision on whether to renew its Somers lease that expires in 2010, Pepsi Bottling Group spokesman Jeff Dahncke said, “It’s premature to discuss exactly how the businesses will be integrated.”