DOW JONES NEWSWIRES
PepsiCo Inc. (PEP) has reached agreements to acquire its two
largest bottlers, succumbing to pressure to increase its nearly
four-month-old bids to buy the remaining stakes of Pepsi Bottling
Group Inc. (PBG) and PepsiAmericas Inc. (PAS) that it didn't
already own.
The deal will allow Pepsi to control 80% of its North American
beverage distribution, a move the company has said would allow it
to cut costs as the region's soda sales have been stagnant for
years in the industry.
Pepsi is valuing Pepsi Bottling at $36.50 a share, with
PepsiAmericas at $28.50. That compares with April's per-share
offers of $29.50 and $23.37, respectively. The deals are
half-cash/half-stock. Pepsi said the shares it has agreed to
acquire are valued at $7.8 billion, based on its new bids.
Pepsi Chairman and Chief Executive Indra Nooyi said while the
company "has had a constructive partnership with" the bottlers for
the past decade and "the existing model has served the system very
well," changes in the North American beverage industry "demand that
we create a more flexible, efficient and competitive system that
can drive growth" of Pepsi's products.
A primary sore spot for Pepsi is Gatorade, whose new marketing
campaign for the sports drink hasn't helped to stop falling sales.
Total beverage volume in the Americas for Pepsi fell 6% in the
second quarter.
Pepsi shares rose 3.3% recently to $58.05 while Pepsi Bottling
and PepsiAmericas rose 7.1% to $36.02 and 7.4% to $28.12,
respectively. The companies hope to close the deals no later than
early 2010.
-By Kevin Kingsbury, Dow Jones Newswires; 212-416-2354;
kevin.kingsbury@dowjones.com