Pioneer shares soar 32% on JSE on PepsiCo buyout bid

JOHANNESBURG – Pioneer Foods and PepsiCo have teamed up to create a potentially leading food and beverage company in Africa after the world’s third-largest food and drink company made an offer to acquire all of the outstanding shares of the South African packaged goods company for $1.7billion (R23.63bn).

PepsiCo has offered to pay R110 a share for the acquisition, representing a 56percent premium to the 30-day volume weighted average price prior to the cautionary announcement on July 15.

PepsiCo said the acquisition will be funded through a combination of debt and cash, and has been unanimously approved by the board of directors of both companies.

However, the transaction is subject to a Pioneer Foods shareholder vote, certain regulatory approvals and other customary conditions, and is expected to be concluded by the first quarter of 2020.

Pioneer Foods’ share price surged more than 32percent on the JSE on Friday to R102.50 a share, up from Thursday’s closing price of R77.60, taking its market capitalisation to R22.72bn, up from R15bn.

PepsiCo chairperson and chief executive Ramon Laguarta said this transaction brings together two like-minded companies, with both Pioneer Foods and PepsiCo aligned around a vision for building a more sustainable future and investing in communities.

“As we look to accelerate our growth in key markets around the world and achieve our vision to be ‘the global leader in convenient foods and beverages by winning with purpose’, we are absolutely thrilled to join forces with Pioneer Foods, one of South Africa’s leading food and beverage companies,” Laguarta said.

Pioneer Foods has a locally relevant product portfolio that complements PepsiCo’s current line-up, with strong positions in cereals, juices, and other African nutritional food staples, including brands such as Weet-Bix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko and White Star.

111855842 - Pioneer shares soar 32% on JSE on PepsiCo buyout bid
PEPSICO’S acquisition of Pioneer Foods is expected to help PepsiCo gain a solid beachhead for expansion into sub-Saharan Africa by boosting the company’s manufacturing and go-to-market capabilities. Reuters

The acquisition is expected to help PepsiCo gain a solid beachhead for expansion into sub-Saharan Africa by boosting the company’s manufacturing and go-to-market capabilities, enabling scale and distribution.

Laguarta added that Pioneer Foods represents a differentiated opportunity for PepsiCo and allows them to immediately scale their business in Africa.

“Pioneer Foods forms an important part of our strategy to not only expand in South Africa, but further into sub-Saharan Africa as well. Our businesses are highly complementary, and we look forward to working with the Pioneer Foods team to successfully build and implement a shared vision in the region,” Laguarta said.

Through this transaction PepsiCo made a commitment to support the broad socio-economic imperatives of employment, talent development that will benefit local suppliers.

The transaction will also enable PepsiCo to expand its sustainable farming programme in Africa and work with local farmers in Pioneer Foods’ communities, including women and rural smallholders.

Pioneer Foods chief executive Tertius Carstens said the announcement marked a very exciting milestone for Pioneer Foods and its people and highlighted the strength of what they have created.

“As part of PepsiCo, we will have greater scale to expand our leading brands, greater capital to invest in local agriculture and people, greater access to leading global capabilities and a partner committed to taking our company to even greater heights,” Carstens said.

PepsiCo will create a new operating sector for sub-Saharan Africa (SSA). PepsiCo SSA will be led by Eugene Willemsen, who most recently served as executive vice-president of global categories and franchise management. Willemsen has been with PepsiCo for nearly 25 years.

The new structure will not impact PepsiCo’s reporting structure, and PepsiCo SSA will remain part of Europe sub-Saharan Africa from a financial reporting perspective.

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