PepsiCo.’s Consolidation Scheme Lacking Support

PepsiAmericas Inc. (PAS) followed larger peer Pepsi Bottling Group Inc. (PBG) on Thursday in turning down PepsiCo Inc.'s (PEP) $6 billion unslicitated takeover bid as unacceptable, calling it too low.

On Thursday, the Minneapolis, Minnesota-based company said PepsiCo’s offer "does not reflect the value of PepsiAmericas' strengths and stand-alone strategies, as evidenced by the company's strong first quarter results." PepsiCo had initially offered to buy PepsiAmericas in a cash and stock deal worth about $23.27 per share, but the bottler’s stock has traded above that price ever since.

As volumes in carbonated soft drinks continued to slump in the U.S., PepsiCo sought to consolidate its bottling business by buying shares it does not already own in the two companies, currently owning 43% of PepsiAmericas and 33% of Pepsi Bottling Group. However, its largest bottler, Pepsi Bottling Group, had rejected its $29.50 per share offer last Monday, calling it "grossly inadequate.”

On Wednesday, PepsiCo Chief Executive Indra Nooyi said it is the right time to buy its two biggest North American bottlers. The soft drinks and snacks maker has also said both bottling companies must agree to a deal or it will not buy either of them. At present, however, none of the bottlers seem to think that it is the right price at which to be taken over considering the amount of synergies and revenue benefits PepsiCo would gain thorugh the acquisition.

Read the full analyst report on PAS