PepsiCo sues own bottler
PepsiCo announced overnight that it would sue Pepsi Bottling Group (PBG) and some of its directors. The news comes in the wake of PBG, Pepsi’s largest bottler, declining a takeover proposal from PepsiCo.
The suit alleges that the defendants intentionally failed to provide notice of a recent PBG Board meeting to the PBG directors affiliated with PepsiCo. At that meeting, the directors in attendance claim to have adopted a “poison pill”, implemented certain new executive compensation arrangements and purported to amend the PBG bylaws in ways PepsiCo believes are detrimental to its rights as a shareholder.
“Because of the lack of notice and consideration by the full Board, PepsiCo alleges those actions by the Board at the meeting are invalid,” the company said in a statement. “PepsiCo further alleges that PBG and its Board breached their fiduciary duties to PBG shareholders by adopting the poison pill because it restricts PepsiCo’s rights as a PBG shareholder and constitutes an unreasonable and disproportionate response to PepsiCo’s constructive proposal. The suit seeks declaratory and injunctive relief.”
On April 19, 2009 , PepsiCo made a proposal to acquire all of the outstanding shares of common stock that it does not already own in its two largest anchor bottlers, PBG and PepsiAmericas (PAS). PepsiCo, which currently owns 33% of the outstanding shares of PBG and 43% of the outstanding shares of PAS, decided they wanted to take back control over distribution in the US to improve the speed of getting new innovations to market.
On May 4, 2009 , PBG announced that its Board had rejected PepsiCo’s proposal. In addition, PBG also announced that its Board had approved adoption of a shareholder rights plan, commonly referred to as a “poison pill,” as well as retention arrangements for certain key employees and amendments to PBG ‘s bylaws regarding notice and informational requirements for shareholder actions.
PAS took a similar approach to PBG in deciding that the offer undervalued their worth, but PepsiCo maintains that the offers are “full and fair”.