PepsiCo bid for largest bottler falls flat

Posted by Daniel Palmer on 5th May 2009

PepsiCo’s bid for their largest bottler, The Pepsi Bottling Group (PBG), has been rejected as “grossly inadequate”.

PepsiCo announced their intention to purchase their two largest bottlers – PBG and PepsiAmericas – around a fortnight ago as part of their plan to gain greater control over distribution. Such a move would enable the group to react to market changes and introduce new innovations more swiftly, consequently providing a competitive advantage over their main rival – The Coca-Cola Company.

Independent Directors for PBG looked into the offer and were unanimous in concluding it would not be in the best interests of minority shareholders. The deal undervalued their worth, growth prospects and the synergies created from a deal, according to a letter sent from PBG to PepsiCo boss Indra Nooyi.

“PBG values its longstanding relationship with PepsiCo, but the PBG Board will not agree to a proposal which does not reflect the true value of PBG,” they advised in the letter. “Accordingly, based on the Special Committee’s unanimous recommendation, the Board has taken customary steps to protect PBG and its stockholders from opportunistic acquisition attempts.”

PepsiAmericas is continuing to assess their offer but a deal will not be done by PepsiCo if they cannot reach an agreement with both companies.