PepsiCo puts fizz into healthy drinks with $3.2 billion SodaStream deal

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PepsiCo will buy carbonated drink-machine maker SodaStream for 3.2 billion US dollars as it battles Coca-Cola for an edge in the health-conscious beverage market.

PepsiCo will pay 144 US dollars per SodaStream share in cash, representing a 10.9-percent premium to Friday’s closing price of SodaStream’s US-listed stock and a 32-percent premium to its 30-day average. The New York-based group will fund the deal with cash on hand.

SodaStream’s US-listed shares were up 10.5 percent in pre-market trading.

The head offices of the company SodaStream, an Israeli maker of carbonation products. /VCG Photo

“With sugary carbonates and juices struggling and no turnaround in sight, mitigating the losses through newer and healthier products will be essential for PepsiCo,” said Euromonitor International analyst Matthew Barry.

SodaStream complements its water business, which includes Aquafina and smaller brands Bubly and Lifewtr, according to PepsiCo.

The company is also experimenting with other non-bottled drinks, including Drinkfinity, which is sold in pods.

The transaction, unanimously approved by the boards of both firms, was expected to close by January 2019, according to PepsiCo.

It said the purchase was another step in its bid to “promoting health and wellness through environmentally friendly, cost-effective and fun-to-use beverage solutions.”

SodaStream, the Israel-based company, markets itself as a sparkling water maker to appeal to younger and more health- and environmentally-conscious consumers, who do not drink much soda.

Euromonitor says bottled water sales saw 6.2 percent compound annual growth in the five years to 2017, while carbonated soft drinks sales were flat.

Adam Epstein, co-founder of Teleios Capital, a top-10 SodaStream shareholder, said the company’s focus on its core product and disciplined approach had started to pay off in recent quarters with “a rapidly growing installed base of loyal users and transformational improvement in operating performance.”

He said the deal “represents an excellent outcome for all shareholders.”

Source(s): Reuters