PepsiCo Agrees to Buy Quaker
N E W Y O R K , Dec. 3 -- PepsiCo Inc. has agreed to buy Quaker Oats Co., the maker of Gatorade and Cap’n Crunch cereal, for $13.4 billion in stock, a source familiar with the negotiations said today.
The boards of both companies approved the deal over the weekend and an announcement is expected Monday morning, the source told The Associated Press on condition of anonymity.
Gaining control of Gatorade gives PepsiCo the dominant brand inthe $2.5 billion sports drink category, which has been growingfaster than colas.
“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.
Rivals of PepsiCo were also vying to acquire Quaker Oats. Theboard of Coca-Cola Co. abandoned talks to buy Quaker two weeks ago;French food conglomerate Danone SA also backed away from a possiblebid.
PepsiCo’s successful offer essentially mirrored the oneChicago-based Quaker rejected in early November.
Anti-Trust Concerns?
The source said PepsiCo was offering 2.3 of its shares for eachQuaker share. Based on PepsiCo’s closing price of $42.375 onFriday, the offer valued Quaker Oats at $13.4 billion or $97.4625per share.
Under the terms of the deal, Quaker Oats can back out ifPepsiCo’s stock dips below $40 a share for a period of 10 randomdays in the month before closing. PepsiCo would have to adjustupward the share-exchange ratio under this scenario in order tokeep the deal alive.
Representatives at PepsiCo, based in Purchase, N.Y., would notcomment on the matter. Quaker Oats did not immediately return callsseeking comment.
The deal could raise antitrust concerns because of PepsiCo’sownership of All-Sport, a competing brand to Gatorade, albeit withmuch less market share. However, PepsiCo has agreed to get rid ofAll-Sport in order to keep the deal alive.
While picking up Gatorade was seen as the primary thrust of thistransaction for PepsiCo, analysts have said that several of QuakerOats’ food products, including granola snack bars and rice cakes,will nicely complement PepsiCo’s line of salty snacks.
