PepsiCo takes back control of their largest bottlers

Posted by Daniel Palmer on 5th August 2009

PepsiCo, one of the world’s largest food and beverage manufacturers, has announced an improved takeover offer has been accepted by the Boards of their two largest bottlers.

Pepsi Bottling Group and Pepsi Americas, who both operate in Europe, North America and Central America, entered into definitive merger agreements with PepsiCo after initially rejecting the approaches of their major shareholder. This forced PepsiCo to offer just under a quarter more than their initial proposal to reap back control of their distribution system.

Pepsi’s plan to consolidate its bottling system came as a shock when first announced in April as it was in stark contrast to their earlier strategy and that of the entire drinks sector.

The $7.8 billion (A$9.23b) deal is expected to provide PepsiCo with $300 million in synergies annually by 2012 and has been made so they can improve the speed of getting new products to market. In a more dynamic marketplace, Pepsi believes this will give them a key advantage of major rival Coke.

“PepsiCo has had a constructive partnership with PBG and PAS over the past 10 years. While the existing model has served the system very well, it is clear that the changing dynamics of the North American liquid refreshment beverage business demand that we create a more flexible, efficient and competitive system that can drive growth across the full range of PepsiCo beverage brands,” PepsiCo Chairman and Chief Executive Officer Indra Nooyi said.
“The fully integrated beverage business will enable us to bring innovative products and packages to market faster, streamline our manufacturing and distribution systems and react more quickly to changes in the marketplace, much like we do with our food business,” Ms Nooyi advised. “Ultimately it will put us in a much better position to compete and to grow both now and in the years ahead.”

The deal is still subject to regulatory and shareholder approval. PepsiCo believes the transactions to be completed by early 2010.