Pepsi buys SodaStream for a future beyond cola

Roman Schwartz
August 20, 2018

PepsiCo will acquire SodaStream for $144 per share in cash, representing a 10.9 percent premium to the Friday closing price of SodaStream's US -listed stock.

PepsiCo chief executive Indra Nooyi, who is stepping down following 12 years at the helm, characterised the purchase of Tel Aviv-based SodaStream as consistent with the United States company's sustainability push, which involves pledges on producing healthier goods, boosting water-use efficiency and reducing waste.

The deal will be funded using Pepsi's cash on hand and has been unanimously approved by the boards of both companies.

If regulators approve the deal, it is expected to be finalised by January 2019, subject to a vote by Sodastream shareholders. The company had marketed itself as a more environmentally friendly alternative to mainstream bottled drinks and therefore a threat to the giant producers.

Buying SodaStream will further boost Pepsi's health credentials. SodaStream sells machines used with compatible carbon dioxide capsules and optional flavoured syrups, and its success in locking in customers allowed it to recently raise its full-year outlook.

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Coca-Cola and Keurig Green Mountain forged a partnership in 2015 to market a counter-top cold-drinks machine, but pulled the plug the following year after it failed to take off.

Sales of soft drinks, PepsiCo's traditional products, are struggling.

Matthew Barry, senior analyst of beverages at Euromonitor International, said deals like the SodaStream purchase were vital for PepsiCo as it passes to new management.

Earlier this month, SodaStream reported its strongest results in company history, a 31pc year-over-year jump in revenues to $172m, an 89pc leap in operating profit to $32m and an 82pc climb by net profit to $26m. The company was acquired by Israel's Soda-Club in 1998 before private equity group Fortissimo Capital bought a controlling stake in 2007.

Three years ago, the firm shut down its West Bank factory amid global boycott calls and opened a sprawling new factory deep in Israel's Negev Desert instead. PepsiCo was advised by Goldman Sachs and Centerview, while SodaStream was advised by Perella Weinberg Partners.

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