PepsiCo Makes Push Into Africa -- WSJ
July 20 2019 - 3:02AM
Dow Jones News
South Africa's Pioneer Foods seen providing springboard for
sales in other countries
By Alexandra Wexler
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 20, 2019).
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 PepsiCo
said it planned to use that market presence as a beachhead for
expansion across the continent.
PepsiCo 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, PepsiCo's newly appointed
chief executive for sub-Saharan Africa, said in an interview,
citing the continent's population and expanding economies.
PepsiCo 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 PepsiCo'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. PepsiCo doesn't break out
its sub-Saharan results; its unit that includes the region plus
Europe reported $11.5 billion in revenue for 2018.
PepsiCo 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 juices
such as Liqui-Fruit and Ceres, as well as Weet-Bix cereal and White
Star maize meal flour.
"The portfolios are highly complementary in nature," Mr.
Willemsen said, adding that the focus will be on building up the
company's food business across Africa.
PepsiCo also sees an opportunity to boost its manufacturing and
marketing capabilities. Mr. Willemsen said the company would take
advantage of the synergies between Pioneer Foods and PepsiCo'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 PepsiCo 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, PepsiCo 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 20, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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