Pepsi Expands in Africa With $1.7 Billion Deal--Update
July 19 2019 - 1:32PM
Dow Jones News
By Alexandra Wexler
JOHANNESBURG -- PepsiCo Inc. has agreed to buy South Africa's
Pioneer Foods Group Ltd. for $1.7 billion, as the
snack-and-beverage giant looks to build up its business 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 that market presence as a beachhead for expansion
across the continent.
Pepsi joins a slew of companies from retailers to hotel chains
to beer makers that are expanding in Africa. The continent offers
businesses the world's fastest-growing population, a number of
swiftly expanding economies and a growing middle class.
"We believe that the African continent represents a tremendous
growth opportunity," Eugene Willemsen, Pepsi's newly appointed
chief executive for sub-Saharan Africa, said in an interview,
citing the continent's population and expanding economies.
Pepsi said it would pay 110 South African rand ($7.93) for each
Pioneer share, a nearly 42% premium to Thursday's closing price.
The stock traded up 32% on Friday.
The deal is Pepsi's second-largest acquisition outside the U.S.
since 2010. Last year, the company bought Israel-based SodaStream
International Ltd. for $3.2 billion.
Pioneer, which has 22 food and beverage brands, mainly operates
in South Africa but exports to more than 80 countries. It reported
revenue of about $1.46 billion last year.
Pepsi said Pioneer's products -- especially cereals, juices and
other African food staples -- would be a good fit with its existing
offerings in the region. Pioneer's brands include Weet-Bix,
Liqui-Fruit, Ceres and White Star.
"The portfolios are highly complimentary in nature," Mr.
Willemsen said, adding that the focus will be on building up the
company's food business across Africa.
Pepsi also sees an opportunity to boost its manufacturing and
marketing capabilities. Mr. Willemsen said Pepsi would take
advantage of the synergies between Pioneer Foods and Pepsi's wholly
owned South African snack-food manufacturer, Simba (Pty) Ltd.
Pioneer's beverage brands are quite well known in sub-Saharan
Africa, said John Thompson, an analyst at Investec Asset Management
in Cape Town, South Africa. That will give Pepsi a leg up in
tapping the growth expected in many African countries, he said. "If
you've got that 15- or 20-year view, I don't think you can go too
far wrong."
With 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 13:17 ET (17:17 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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