PepsiCo offers to buy outstanding shares in bottlers

by Staff
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PURCHASE, N.Y. — In an effort to create a more lean business model and provide for PepsiCo’s future growth, the company has proposed to acquire all outstanding shares of common stock it does not already own in The Pepsi Bottling Group and PepsiAmericas.

PepsiCo’s proposal is for a value of $29.50 per share for The Pepsi Bottling Group and $23.27 for PepsiAmericas for a total proposed cost of $6 billion. The offer consists of $14.75 in cash plus 0.283 shares of PepsiCo common stock for each share of The Pepsi Bottling Group and $11.64 in cash plus 0.223 shares of PepsiCo common stock for each share of PepsiAmericas.

PepsiCo currently owns 33% of outstanding shares of The Pepsi Bottling Group and 43% of outstanding shares of PepsiAmericas.

"Our operating environment has evolved dramatically in the last decade," said Indra Nooyi, chairman and chief executive officer. "Retailers have continued to consolidate. New competitors have emerged. 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 portfolio. We believe that by reshaping our business model we can significantly improve our competitiveness and our growth prospects."

The transaction is expected to be accretive to PepsiCo’s earnings by at least 15c per share. Other benefits of the potential transaction include the ability to bring product and package innovation to market more quickly, more streamlined manufacturing and distribution systems, greater flexibility in how the company goes to market, improved national account coordination, and the ability to react quickly to technological advances.

"Consolidating the bottling businesses with our franchise company would create many benefits," Ms. Nooyi said. "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 a new level our ‘Power of One’ program of bundled food and beverage offerings."

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