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Pepsi seeks control of its 2 largest bottlers in $6 billion deal
NEW YORK -- "Something needs to be done to get things in better shape," says John Faucher, JPMorgan beverage analyst. "Pepsi is saying ... 'Let's go out and get some long-term profits.' "
PepsiCo, which owns 33% of PBG and 43% of PAS, on Monday offered a 17% premium in cash and stock of $29.50 a share for the rest of PBG and $23.27 a share for PAS. The PBG per-share offer is $14.75 cash and 0.283 shares of PepsiCo common stock. For PAS, it's $11.64 in cash and 0.223 shares. Pepsi said it will only do the deal if both companies agree. The two said the offers are being evaluated by their boards.
In 2008, overall soft drink volume fell 2%, while carbonated soft drinks fell 3%, Beverage Digest reports. Non-carbonated products are about 40% of Pepsi-Cola volume, vs. less than 15% 10 years ago.
But even growth in non-carbonated products that propped up volume for years, such as bottled water and sports drinks, has slowed.
Growing now, but not enough to take up the slack, are waters fortified with health additives, juices and low-calorie versions of sports drinks, such as Gatorade's G2.
Full control of the bottlers "will be a great enabler for the transformation of our portfolio for health and wellness products," says Massimo d'Amore, CEO of PepsiCo Americas Beverages. "Most of the health and wellness products are non-carbonated beverages and require a different structure that is more flexible with a different route to market."
That's because those brands tend to be smaller, and hundreds exist today that didn't exist 10 years ago. "In many cases, bottlers are not optimally equipped to handle smaller-volume, slower-moving" products, says John Sicher, editor and publisher of Beverage Digest.
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