Pepsi Buys Quaker in $13.4B Stock Deal

N E W  Y O R K, Dec. 4 -- PepsiCo. has agreed to acquire Quaker Oats, the maker of Cap’n Crunch cereal, Aunt Jemima pancake products and Gatorade, in a deal worth $13.4 billion in stock.

Adding the popular Gatorade to its fleet of non-carbonatedbeverages, which includes Aquafina water, Lipton teas and Tropicanajuices, will give PepsiCo control of the dominant brand in the $2.5billion sports drink category.

“This will be a truly outstanding combination,” Roger A.Enrico, PepsiCo chairman and chief executive officer, said in astatement. “Bringing together Quaker and PepsiCo creates a wealthof exciting growth opportunities.”

Management Changes

PepsiCo will offer 2.3 of its shares for each Quaker share underthe deal announced today. The boards of both companies approvedthe deal over the weekend, but it’s still subject to regulatoryapproval.

When the deal closes, Enrico said Steve Reinemund, PepsiCopresident and chief operating officer, will succeed him as chairmanand CEO. Chief financial officer Indra Nooyi will add the title ofpresident.

Morrison, Quaker chairman and CEO, will be a vice chairman ofthe combined company.

Under terms of the deal, Quaker Oats can back out if PepsiCo’sstock dips below $40 a share for a period of 10 random days in themonth before closing. Under this scenario, PepsiCo would have toincrease the share-exchange ratio in order to keep the deal alive.

Quenching a Long Thirst

At least two PepsiCo rivals had a similar thirst to acquireQuaker Oats: the board of Coca-Cola abandoned talks to buyQuaker for a reported $15.75 billion two weeks ago and French foodconglomerate Danone SA backed away from a possible bid.

In the end, PepsiCo beat out its competitors with an offer thatessentially mirrored the one rejected by Chicago-based Quakerroughly one month ago.

“Gatorade would do even better under PepsiCo than it has underQuaker Oats because of better marketing and distribution,” saidJohn Sicher, a veteran soft drink industry watcher who publishesBeverage Digest in New York.