Analysis - PepsiCo merger talk suggests potential US$60bn beverage sale
PepsiCo has confirmed talks with Nelson Peltz
Bernstein analyst Steve Powers told just-drinks today (22 April) that, were a merger or takeover to go ahead, PepsiCo's beverage units could become a standalone company or a subsidiary of a different multi-national conglomerate. “The potential buyers are not a very long list, but people who are expected to have a possible interest are ABI, probably as the leading candidate,” Powers said.
Bernstein estimates PepsiCo's beverage business, which includes PepsiCo Americas Beverages and its global bottlers, would be worth up to ten-times the company's EBITDA, or about $60bn.
Rumours surfaced last month that activist investor Nelson Peltz's Trian Fund Management firm is building stakes in PepsiCo and Mondelez with a view to merging them. PepsiCo last week confirmed it has held discussions with Peltz after the businessman disclosed he has a $269m stake in the soft drinks and snacks group.
Powers said that while a standalone PepsiCo beverage business “might be viewed as an easier competitor from the vantage point of Atlanta”, it would allow drinks brands to move out of the shadow of PepsiCo's more successful snack products.
“Snacks is where the majority of PepsiCo's profit and economic value lies so it makes logical sense for PepsiCo to focus more on snacks than drinks,” Powers said. “If (beverages) were standalone (PepsiCo) would be forced to focus and therefore a more formidable operator.”
In a note today, Bernstein said it viewed a PepsiCo/Mondelez combination as strategically and financially viable but warned that it is not known if Trian seeks a merger.
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