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PepsiCo is selling its Tropicana and Naked brands to private equity firm PAI Partners as part of a $3.3 billion deal.
The deal, which also contains other select juice brands and is expected to close in late 2021 or early 2022, includes PepsiCo selling the brands in North America and an irrevocable option to sell certain juice businesses in Europe. This will result in combined pre-tax cash proceeds of approximately $3.3 billion, with PepsiCo retaining a 39% non-controlling interest in a newly formed joint venture.
PAI will be the majority shareholder of the transferred business, while PepsiCo keeps exclusive U.S. distribution rights to the brands in its direct-store delivery for small-format and foodservice channels.
PepsiCo acquired the Tropicana brand in 1998 and the Naked brand in 2007.
These juice businesses delivered around $3 billion in net revenue in 2020 with operating profit margins below PepsiCo's 2020 operating margin, the No. 3 consumer goods company said. It expects to use the sale proceeds to strengthen its balance sheet and make organic investments in the business.
"This joint venture with PAI enables us to realize significant upfront value, whilst providing the focus and resources necessary to drive additional long-term growth for these beloved brands," said Ramon Laguarta, PepsiCo chairman and CEO. "In addition, it will free us to concentrate on our current portfolio of diverse offerings, including growing our portfolio of healthier snacks, zero-calorie beverages, and products like SodaStream which are focused on being better for people and the planet."
Laguarta cited “holistic health” and non-sugar foods in a recent earnings call as two consumer behavior trends that he thinks are here to stick after the pandemic.
PAI Partners’ investments include ice cream manufacturer Froneri and sustainable food company Ecotone.