PEP PepsiCo Inc

By Alexandra Wexler 

JOHANNESBURG -- PepsiCo Inc. has agreed to pay $1.7 billion to buy South Africa's Pioneer Foods Group Ltd., as the beverage giant looks to expand and accelerate its growth in Sub-Saharan Africa.

Pioneer Foods is one of South Africa's largest producers and distributors of branded food and beverage products, and Pepsi said it planned to use its presence in the country as a beachhead for expansion across the continent.

Pepsi joins a slew of companies from retailers to hotel chains to beer makers that are boosting their presence in Africa. The continent boasts the world's fastest-growing population, a number of swiftly expanding economies and a growing middle class.

"Pioneer Foods represents a differentiated opportunity for PepsiCo and allows us to immediately scale our business in Africa," said Chief Executive Ramon Laguarta.

Pepsi said Friday it would pay 110 South African rand ($7.93) a share for Pioneer, a near 42% premium to its closing price Thursday. Pioneer shares jumped 29% in early trading.

Pioneer, which has 22 food and beverage brands, mainly operates across South Africa but exports to more than 80 countries. It reported revenue of 20.2 billion rand ($1.46 billion) last year.

Pepsi said Pioneer's products would be a good fit with its existing offerings, especially in cereals, juices and other African food staples, and that the purchase would also boost its manufacturing and go-to-market capabilities.

Pioneer's brands include Weet-Bix, Liqui-Fruit, Ceres and White Star.

As a result of the acquisition, Pepsi said it would expand its sustainable farming program in Africa and work with local farmers to help boost yields, improve livelihoods, and preserve natural resources.

The deal has been unanimously approved by the boards of both companies, but is subject to approval from Pioneer's shareholders and regulators. The deal is expected to close by the first quarter of 2020.

Write to Alexandra Wexler at alexandra.wexler@wsj.com

(END) Dow Jones Newswires

July 19, 2019 06:21 ET (10:21 GMT)

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