PepsiCo Makes Strategic Moves for Beverage Business
PepsiCo proposes 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 and PepsiAmericas, at a value of $29.50 per share for The Pepsi Bottling Group and $23.27 per share for PepsiAmericas. 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.
PepsiCo Chairman and Chief Executive Officer Indra Nooyi, says, "Our operating environment has evolved dramatically in the last decade. 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.
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.
"Consolidating the bottling businesses with our franchise company would create many benefits," Ms. Nooyi says. "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 customized solutions, as we do at Frito-Lay, and to take to a new level our 'Power of One' program of bundled food and beverage offerings."
UPDATE: On April 24, 2009, PepsiAmericas announces that its Board of Directors has formed a Transactions Committee consisting of independent directors which has begun to review the non-binding proposal from PepsiCo Inc. Goldman, Sachs & Co., Briggs and Morgan, P.A. and Sullivan & Cromwell LLP have been retained as advisors.
PepsiCo Chairman and Chief Executive Officer Indra Nooyi, says, "Our operating environment has evolved dramatically in the last decade. 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.
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.
"Consolidating the bottling businesses with our franchise company would create many benefits," Ms. Nooyi says. "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 customized solutions, as we do at Frito-Lay, and to take to a new level our 'Power of One' program of bundled food and beverage offerings."
UPDATE: On April 24, 2009, PepsiAmericas announces that its Board of Directors has formed a Transactions Committee consisting of independent directors which has begun to review the non-binding proposal from PepsiCo Inc. Goldman, Sachs & Co., Briggs and Morgan, P.A. and Sullivan & Cromwell LLP have been retained as advisors.