PepsiCo defensive over proposed bottler takeover

Posted by Isobel Drake on 4th June 2009

PepsiCo has continued in its bid to acquire its two US anchor bottlers Pepsi Bottling Group and PepsiAmericas, and remains convinced that there are annual synergies of at least $200 million. After rejections from both bottlers last month, who claim the proposal undervalues their worth, PepsiCo believes there is no justification for the estimates that PBG released yesterday of purported annual synergies of $750 million to $850 million. By way of comparison, PBG previously communicated to PepsiCo that a combination of PBG and PepsiAmericas (NYSE: PAS) would generate synergies well below $100 million.

The company said its proposal to acquire its two anchor bottlers was because of “the need to strategically reshape the business and improve the system’s competitiveness and growth prospects”.

Currently owning 33% of PBG shares, PepsiCo believes it has offered a “full and fair price” to acquire the remaining 75%.

Despite PBG ‘s stock price rising 45% in the 30 trading days prior to PepsiCo’s offer, PepsiCo offered an additional 17% premium to PBG ‘s shareholders. The offer price was a 69% premium to PBG ‘s stock price as of 30 trading days prior to the offer, which is well in excess of average premiums for comparable transactions.

If in the future PepsiCo remains a stockholder in a public PBG, the company says it intends to “maintain a disciplined stance with regard to the commercial arrangements between PBG and PepsiCo”.