PepsiCo Inc (PEP Quick QuotePEP - Free Report) announced its decision to acquire SodaStream International Ltd. on Aug 20 for a deal price of $3.2 billion or $144 per share in cash. This price was locked in at a premium of 32% above the 30-day weighted average market price and a 10% premium to its closing price on Aug 17. SodaStream has been witnessing significant growth. Revenues increased 31% to $171.5 million in the last reported quarter, the company’s  most successful quarter ever and the ninth consecutive quarter of double-digit revenue growth. However, America generated only $38 million in revenues (see all Consumer Staple ETFs here).

 

The deal, awaiting approval from regulators and SodaStream shareholders, has been authorized by the board of directors of both the companies and is expected to be close by January 2019. The acquisition is considered to be a significant move by PepsiCo CEO Indra Nooyi, who announced her retirement on Aug 6. Her tenure at PepsiCo ends on Oct 3.

 

She was quoted saying, "PepsiCo and SodaStream are an inspired match." It’s "an extraordinary company that is offering consumers the ability to make great-tasting beverages while reducing the amount of waste generated."

 

In July, PEP reported that the North American segment of the company, which accounts for 16% of total operations, had declined for four quarters in a row. SODA is an Israel-based company that has capitalized on the rising interest in the domain of sparkling water. The company sells a countertop device that quickly turns tap water to carbonated water. Desired flavors could be added with special drops and syrups.

 

Pepsi foresees the future of soda at home rather than in the packed aluminum cans. The beverage conglomerate has been pushing for a place in the seltzer arena, with the introduction of Bubly sparkling water (launched in Feb 8 this year). The transaction is seen as one of the several moves to reorient PEP’s beverage portfolio to include healthier, on-trend categories. SodaStream products are channeled through 80000-plus retail locations in 45 countries.The acquisition will also reap environments benefits for Pepsi as SodaStream uses reusable canisters leading to lower waste production (read: Top and Flop ETFs of last week).

 

 

PepsiCo closed 0.1% lower on Aug 20 while SODA shares saw a rise of 9.4%. The news also brought the funds with the largest exposure to PepsiCo in focus (read: PepsiCo Q2 Earnings Aid Staples ETFs, Are Gains Transitory).

 

Here we highlight five ETFs with the maximum allocation to PEP:

 

Consumer Staples Select Sector SPDR Fund (XLP Quick QuoteXLP - Free Report)

 

This fund tracks the Consumer Staples Select Sector Index. The focus is on companies that are primarily involved in the development and production of consumer products spanning food and drug retailing, beverages, food products, tobacco, household products, and personal products. There are 32 holdings in the basket with PEP placed third with 9.67% weight. The average daily traded volume is 14.16 million shares. The fund has an AUM of $9.55 billion and charges an expense ratio of 0.13%. The fund lost 0.01% on Aug 20. It has a Zacks ETF Rank of #5 (Strong Sell) with a Medium risk outlook . 

 

iShares Evolved U.S. Consumer Staples ETF

 

It is an actively managed fund, which employs data science to identify companies with exposure to the consumer staples sector. There are 113 holdings in the fund’s pool with the second spot going to PEP with 8.68% weight. The fund has an AUM of $3.8 million and expense ratio of 0.18%. The fund trades at a daily average of 1000 shares and gained 0.55% on Aug 20.

 

Fidelity MSCI Consumer Staples Index ETF (FSTA Quick QuoteFSTA - Free Report)

 

This fund tracks the MSCI USA IMI Consumer Staples Index using a representative sampling indexing strategy. It offers exposure to 90 firms. Of these, PEP takes the third position with 8.82% weight. The average daily traded volume is 77500 with an AUM of $331.9 million. The expense ratio is 0.08%.The fund gained 0.15% on Aug 20. It has a Zacks ETF Rank of #5 with a Medium risk outlook. 

 

Vanguard Consumer Staples ETF (VDC Quick QuoteVDC - Free Report)   

 

The fund tracks the MSCI US Investable Market Consumer Staples 25/50 Index. The fund has exposure to 94 securities and 8.45% weight is assigned to PEP placed third on the list. The fund has an AUM of $4.09 billion and an expense ratio of 0.1%. The fund has an average traded volume of 134000 shares and gained 0.01% on Aug 20. It has a Zacks ETF Rank of #5 with a Medium risk outlook. 

 

iShares U.S. Consumer Goods ETF (IYK Quick QuoteIYK - Free Report)

 

The fund tracks the Dow Jones U.S. Consumer Goods Index. There are 107 holdings in the basket and third place goes to PEP having 7.57% weight. The fund has an AUM of $544.5 million and expense ratio is 0.44%. The fund lost 0.01% on Aug 20. It has a Zacks ETF Rank of #4 (Sell) and a Medium risk outlook. Liquidity is on the lower side with average trading of 39,000 shares daily.

 

 

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