US: PepsiCo closes bottlers deal

By | 1 March 2010

PepsiCo bottlers deal now complete

PepsiCo bottlers deal now complete

PepsiCo has completed the takeover of its two largest bottlers, Pepsi Bottling Group and PepsiAmericas, as expected.

PepsiCo is expected to formally announce details regarding the merged companies today (1 March).

In addition, Dr Pepper Snapple Group (DPS) has completed the licensing of certain brands to PepsiCo following the acquisitions. DPS received a one-time cash payment of US$900m before taxes and other related fees and expenses as a result of the deal.

The company used a portion of these proceeds to reduce its total debt obligations to $2.55bn, in-line with its target capital structure of approximately 2.25 times total debt to EBITDA after certain adjustments.

"Having achieved our capital structure target less than two years after going public, and with a focus on growing the business organically, we are now committed to returning excess cash to shareholders over time," said Larry Young, DPS president and CEO. 

"We're excited to be working with PepsiCo and are confident in our continuing ability to generate strong cash flows."

Under the new licensing agreements, PepsiCo will distribute Dr Pepper, Crush and Schweppes in the US territories where these brands were formerly distributed by PBG and PAS. The same will apply for Dr Pepper, Crush, Schweppes, Vernors and Sussex in Canada, and Squirt and Canada Dry in Mexico.

The new agreements will have an initial term of 20 years, with 20-year renewal periods, and will require PepsiCo to meet certain performance conditions.

PepsiCo received early approval from the US Federal Trade Commission (FTC) to enable it to close the US$7.8bn deal on Friday.

The announcement came less than 24 hours after rival The Coca-Cola Co said that it would take full control of its own major bottler's operations in North America.

Sectors: Soft drinks, Water

Companies: PepsiCo, Dr Pepper, Pepsi Bottling, PepsiAmericas, Coca-Cola Co

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