PepsiCo strikes $3bn deal to buy SodaStream
Beverage and snacks group looks to continue health-conscious strategy for growth
PepsiCo has agreed to buy SodaStream, the Israeli maker of home fizzy drink dispensers, for $3.2bn, just weeks after the US consumer group announced that its chief executive Indra Nooyi would step down later this year.
The acquisition of the health-conscious soda maker is a clear indication that Pepsi’s incoming chief executive, Ramon Laguarta, plans to continue developing the company in a similar direction as his predecessor.
SodaStream fits with Pepsi’s broader strategy under Ms Nooyi’s 12-year leadership, during which she switched the company’s focus from sugary sodas to healthier snacks and beverages.
SodaStream, which fashions itself as a health and wellness alternative to cola drinks, would complement Pepsi’s healthier options, which include the flavoured sparkling water brand Bubly and the fruit and vegetable snacks maker Bare Foods.
“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,” said Mr Laguarta.
Pepsi has agreed to pay shareholders of Nasdaq-listed SodaStream $144 per share in cash, a 32 per cent premium to the company’s 30-day volume weighted average price. The transaction, which needs to be approved by SodaStream shareholders, is expected to close by January 2019.
Global food and beverage companies have been carrying out a series of calibrated deals in recent years as they try to reposition their portfolios as health conscious consumers opt for fewer sugary drinks.
Pepsi’s deal comes days after its main rival Coca-Cola agreed to buy a minority stake in BodyArmor, a sports drink maker backed by US basketball star Kobe Bryant. Coca-Cola’s move comes as it has struggled over the years to loosen the hold of Pepsi’s sports drink business Gatorade.
SodaStream will continue to be led by its current chief executive, Daniel Birnbaum, as Pepsi aims to expand the Israeli company by giving it access to its strong global distribution, research and development firepower and marketing expertise.
“The intent is to maintain the business as a standalone unit, keep the growth, maintain the culture and not stifle the organisation with corporate types of restrictions,” Mr Birnbaum told the Financial Times.
SodaStream has grown strongly in parts of Europe and Asia in recent years but lagged in the US, where its fizzy drink dispensers have less than 2 per cent market penetration.
Its shares jumped this month after it reported that net income in the second quarter rose 82 per cent to $26m compared with $14m a year ago, and revised upwards its growth projections for the year.
In the beverage market, Coca-Cola and Pepsi also face new competition from consumer group JAB Holding, a Luxembourg-based investment vehicle backed by the Reimann family. As part of an international buying spree, JAB bought the Keurig Green Mountain coffee business, which is best known for its single-serve brewing machines, in December 2015 for $13.9bn.
A major shareholder in Keurig at the time, Coca-Cola agreed to sell its entire stake. JAB subsequently discontinued Keurig’s cold brewing system that allowed consumers to make their own sodas from pods including those produced by Coca-Cola.
In January 2018, JAB struck a $18.7bn deal to acquire Dr Pepper Snapple and combined it with Keurig to create a beverage group with nearly $11bn in annual revenue.