PepsiCo to Buy its Biggest Bottlers in $7.8 Billion Deal

The new deal is expected to create annual synergies of $300 million by 2012 largely due to greater cost efficiency and also improved revenue opportunities.

PepsiCo said on August 4 it had reached a deal to acquire its two key bottlers for $7.8 billion, creating one of the largest food and beverage companies.

Under merger agreements, PepsiCo said it would buy all of the outstanding shares of common stock it does not already own in its two largest anchor bottlers -- The Pepsi Bottling Group and PepsiAmericas.

PepsiCo presently owns 33% of PBG and and 43% of PepsiAmericas.

"The acquisitions will create one of the largest food and beverage companies globally," PepsiCo said. The transaction would also "directly complement the transformation efforts already underway" in its North American beverage business.

They included "refreshing" such brands as Pepsi and Gatorade and introducing new products as well as steps to "fundamentally improve" its cost structure.

"The fully integrated beverage business 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 chief executive Indra Nooyi said. "Ultimately it will put us in a much better position to compete and to grow both now and in the years ahead," she said.

PepsiCo, whose larger rival is Coca-Cola, had more than $43 billion in 2008 revenues.

It said the new deal was expected to create annual synergies of $300 million by 2012 largely due to greater cost efficiency and also improved revenue opportunities.

PBG chief executive Eric Foss said the deal "represents full and fair value and is the best outcome" for shareholders, employees and customers. "Ultimately, the transaction positions the entire Pepsi system to continue to win in the marketplace."

PepsiAmericas chief executive Robert Pohlad said, "Bringing together these three great companies is bold and strategically innovative, and will create a system unmatched in our industry."

PBG's annual sales are worth nearly $14 billion and has operations in the U.S., Canada, Greece, Mexico, Russia, Spain and Turkey.

PepsiAmericas' sales hit $4.9 billion dollars in 2008. Aside from the U.S., it operates in Central and Eastern Europe, the Caribbean and Central America.

Copyright Agence France-Presse, 2009

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