PepsiCo to buy Mpls bottler, one other, for $7.8B
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Months after its first offers were rejected, PepsiCo Inc. said Tuesday it plans to buy its two biggest bottlers, Pepsi Bottling Group and PepsiAmericas, in deals worth a total of $7.8 billion.
The world's second-biggest drink maker said Tuesday it will pay $36.50 per share for Pepsi Bottling Group and $28.50 per share for PepsiAmericas. Both offers are half stock and half cash. PepsiAmericas is based in Minneapolis.
Shares of the two bottlers soared on the news Tuesday morning, with shares of Pepsi Bottling up $2.30, or 6.8 percent, to $35.92.
Shares of PepsiAmericas rose $1.94, or 7.4 percent, to $28.09. Shares of PepsiCo rose $1.45, or 2.6 percent, to $57.65.
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PepsiAmericas is one of Minnesota's 19 Fortune 500 companies. Robert Pohlad, the second son of the late Twin Cities banking czar and Minnesota Twins owner Carl Pohlad, is the CEO of the company.
Regulatory filings indicate Robert Pohlad controls about 10 percent of shares of PepsiAmericas, which has annual sales of nearly $5 billion. It operates in parts of Minnesota and 18 other states, as well as several countries in Europe and the Caribbean.
PepsiCo already has a large stake in PepsiAmericas, the second-biggest Pepsi bottler in the country.
PepsiAmericas employs more than 20,000 people and operates 33 manufacturing facilities and some 175 distribution centers. It's unclear how many people PepsiAmericas employs in Minnesota.
PepsiAmericas operations are somewhat limited in the state. Its markets do not include the Twin Cities. That's the turf of Pepsi Bottling Group, the other bottler PepsiCo is buying.
PepsiAmericas and Pepsi Bottling had rejected an earlier buyout offer said to be worth a total of $6 billion, saying it undervalued them. Analysts had said the deals would go through if PepsiCo boosted its offer.
Purchase, N.Y.-based PepsiCo Inc., which makes brands like Pepsi and Gatorade, believes that owning the bottlers will help it save about $300 million a year by 2012, up from original estimates of $200 million, which analysts had said was too low.
The deals also allow PepsiCo to directly manage 80 percent of its drinks distribution in North America, which PepsiCo said is key as it deals with consumers who are increasingly spurning soft drinks for health reasons and to save money.
Controlling that much distribution means the company can better respond to a changing marketplace and a changing marketplace, PepsiCo CEO Indra Nooyi said on a conference call.
Consumers are looking for healthier options like juices and teas and Nooyi said by owning its bottlers, PepsiCo can be quicker to market with new products to keep up as consumers' tastes evolve.
She also said this means PepsiCo can give new products more prominence on shelves, which otherwise wouldn't happen.
"We believe we are taking a very important step to strategically reshape the North American beverage business," she said.
Shareholders in the bottlers will have the option to take cash or shares of PepsiCo stock, as long as the cash payout for each set of shareholders does not exceed 50 percent of the total purchase price.
PepsiCo expects the deals to add to earnings 15 cents per share once the bottlers are fully integrated.
Pepsi Bottling is based in Somers, N.Y.
The deals are subject to regulatory approval, though Nooyi did not say when the company would file for approval.
