Pepsi faces opposition over bottler offers

Posted by Editorial on 28th April 2009

A class action lawsuit has been filed by two pension funds against the Pepsi Bottling Group alleging breaches of duty arising out of their attempt to sell Pepsi Bottling Group to PepsiCo.

The surprise offer by PepsiCo for their two primary US bottlers – Pepsi Bottling and PepsiAmerica – was announced last week in an attempt to gain greater control over distribution. The move comes a decade after PepsiCo sought to separate itself from its bottlers, believing it would help the company focus on soft-drink growth while keeping bottling assets off its balance sheet.

The offer represented a 17.1% premium on the stocks of the two bottlers when the deal was announced but was contingent on both bottlers agreeing to the proposal – which one suit claimed would limit the ability of Pepsi Bottling to attract a higher price. Both suits suggest that the deal undervalues the bottler given its growth potential and the synergies created by a takeover.

The suits are requesting management of the Pepsi Bottling Group be prevented from pursuing the proposal unless a higher price is sought.