PepsiCo has agreed to acquire all outstanding shares in SodaStream for US$144 per share in cash, representing a 32% premium on SodaStream’s 30-day weighted average share price and valuing the group at approximately $3.2bn.
Accelerating ‘performance with purpose’
Announcing the agreement, PepsiCo chairman CEO and Indra Nooyi said that the move builds on the company’s so-called ‘performance with purpose’ strategy. Under Nooyi’s leadership, PepsiCo has focused on improving its financial performance while improving its environmental footprint and shifting its product portfolio towards healthier products.
"PepsiCo and SodaStream are an inspired match," said Nooyi.
Nooyi, who is due to stand down as chief executive this October, described SodaStream as an “extraordinary company” that offers consumers the “ability to make great-tasting beverages while reducing the amount of waste generated”.
“That focus is well-aligned with performance with purpose, our philosophy of making more nutritious products while limiting our environmental footprint. Together, we can advance our shared vision of a healthier, more-sustainable planet,” Nooyi claimed.
Moving 'beyond the bottle’
As well as advancing PepsiCo’s better-for you offering and expanding its relatively small waters business, CEO-elect Ramon Laguarta suggested that the acquisition provides PepsiCo with “new ways” to reach consumers.
"SodaStream is highly complementary and incremental to our business, adding to our growing water portfolio, while catalysing our ability to offer personalised in-home beverage solutions around the world," Laguarta said.
"From breakthrough innovations like Drinkfinity to beverage dispensing technologies like Spire for foodservice and Aquafina water stations for workplaces and colleges, PepsiCo is finding new ways to reach consumers beyond the bottle, and today's announcement is fully in line with that strategy."
Extending SodaStream’s reach
Israel-based SodaStream will be able to step up its global expansion efforts, the company claimed. SodaStream, which already has operations throughout Europe and North America, will feed its products into PepsiCo’s extensive sales and distribution channels, Daniel Birnbaum, SodaStream CEO and director said.
SodaStream will also be able to leverage PepsiCo’s R&D, design and marketing expertise to deliver “breakthrough innovation”, the company suggested.
SodaStream provides PepsiCo with what Birnbaum described as a “beachhead” in at-home beverage preparation.
“Today marks an important milestone in the SodaStream journey. It is validation of our mission to bring healthy, convenient and environmentally friendly beverage solutions to consumers around the world,” Birnbaum continued.
“I am excited our team will have access to PepsiCo's vast capabilities and resources to take us to the next level,” he added.
Does it solve PepsiCo’s drinks dilemma?
Wells Fargo analyst Bonnie Herzog suggested that the SodaStream acquisition will help accelerate PepsiCo’s strategic shift towards healthier options in its product mix as well as complementing the group’s growing water portfolio, which includes the recently launched sparkling water brand Bubly. Additionally, the foothold in the at-home market could potentially drive revenue synergies, the analyst added.
However, Herzog is less convinced that the move will address the underlying issues at the beverages unit.
Revenue at PepsiCo’s beverage unit has come under sustained pressure.
In North America in particular, PepsiCo has struggled to deliver growth with sales falling 0.9% in its most recent quarter – its fourth straight quarter of decline.
This performance stands in contrast to PepsiCo’s overall growth trends, with group sales increasing 2.4% thanks to revenue gains in snacks and international.
“We can’t help but… question whether this deal – which brings together a large consumer packaged goods company and an in-home beverage maker – will do much to solve PepsiCo’s ongoing struggle to improve volumes in its North American Beverage segment (which, despite sequentially improving in the second quarter, remain weak). In short, we remain concerned about challenges facing PEP’s core business," Herzog noted.
The acquisition has been unanimously approved by the boards of both companies and is subject to a SodaStream shareholder vote, regulatory approvals and other customary conditions. It is expected to close in January next year.