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PepsiCo to expand reach with Pioneer deal
Posted on Friday, 19 July 2019 13:06
PepsiCo has agreed to buy South African packaged goods company Pioneer Foods Group for USD 1.70 billion in cash.
Through the acquisition, which is slated to complete in the first quarter of 2020, the purchaser will be able to expand into the Sub-Saharan African (SSA) region and increase its manufacturing and go-to-market capabilities.
PepsiCo is offering ZAR 110.00 (USD 7.89) per share, representing a premium of 41.3 per cent to the target’s close of ZAR 77.84 on 18th July, the last trading day prior to the deal being announced.
Following the news of an acquisition, Pioneer’s stock rose by 28.0 per cent, peaking at ZAR 100.00 at 09:30 earlier today.
The purchase, which will be funded via a combination of cash and debt, implies a multiple of 11x the target’s projected earnings before interest, taxes, depreciation and amortisation for fiscal year 2020.
Established in 1996 and listed on the Johannesburg Stock Exchange, Pioneer is one of South Africa’s largest producers and distributors of packaged foods and beverages.
It operates through three main divisions, namely essential foods, groceries and international, which include brands such as Sasko, Weet-Bix, Ceres and Liqui Fruit.
The group posted revenue of ZAR 11.04 billion for the six months ended 31st March 2019, up from ZAR 9.90 billion in the corresponding period of 2019.
As a result of the transaction, PepsiCo will create a new operating sector for SSA, which will be headed by Eugene Willemsen, the executive vice president of the buyer’s global categories and franchise management division.
The deal, which has been approved by the boards of both companies, enables the purchaser to establish a leading food and beverage company in South Africa that supports local suppliers.
Furthermore, PepsiCo will be able to expand its sustainable farming programme in Africa, which works with communities, including women and rural smallholders, to boost yields and preserve natural resources, whilst improving livelihoods across the continent.
According to Zephyr, the M&A database published by Bureau van Dijk, the acquisition would be the biggest deal targeting a South African food manufacturer announced worldwide on record.
The previously largest transaction involved Groupe Lactalis buying Aspen Pharmacare Holdings’ instant formula business for EUR 740.00 million.
© Zephus Ltd