George S. May Business Blog

Pepsi offers $6 billion in cash and stock

In an attempt to further increase the power of the PepsiCo Inc empire, the world’s second largest soft drink maker offered about $6 billion in cash and stock to buy out shareholders of its two biggest bottlers.

In short, PepsiCo if proposing a $23.27 buyout for PepsiAmericas Inc. shares and the equivalent of $29.50 for the stock it doesn’t already own in it’s biggest bottler, Pepsi Bottling Group. The transactions will give the maker of Pepsi, Gatorade and Tropicana full control over about 80 percent of its North American beverage volume, the Purchase, New York-based company said in its statement. CEO Indra Nooyi added that the acquisitions should “unlock significant cost synergies, improve the speed of decision making and increase our strategic flexibility…By reshaping our business model we can significantly improve our competitiveness and growth prospects.”

This is definitely a timely move as PepsiCo, along with both of Pepsi’s bottlers have lost 26 percent of their market value in the last year. I can not agree more with a move like this. See, as large corporations like Pepsi start to watch major losses take place, it becomes apparent that in such a climate, the same old techniques that have worked so wonderfully in the past, no longer will. Now, is the time for Pepsi to restructure and adapt to our current economy. With an acquisition like this one, what Pepsi is trying to do it, essentially, cut out the middle man. See, by having control over the bottling, they will cut down on the numbers of hoops they have to jump through in order to get a new product into production and out the public. They, in theory, will instantly become a much more efficient machine by streamlining manufacturing and production.

From are some other facts that I pulled from Bloomberg:

First-quarter earnings per share for PepsiCo rose to 72 cents from 70 cents a year earlier. The company reaffirmed full- year guidance of mid- to high-single-digit constant-currency net sales and core earnings per share growth in a separate statement today.

PepsiCo owns 33 percent of Pepsi Bottling and 43 percent of PepsiAmericas, according to data compiled by Bloomberg.

PepsiCo shares rose 0.3 percent to $52.13 on April 17, while Pepsi Bottling was little changed at $25.20 and PepsiAmericas advanced 0.35 percent to $19.88. advisers

The sodamaker is offering $14.75 in cash and 0.283 of common stock for each share it doesn’t already own of Pepsi Bottling Bottling Group. The sodamaker is offering $11.64 and 0.223 of common stock for each share in PepsiAmericas.

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