Pepsi gains foothold in Africa with $1.7 billion Pioneer deal

Reuters

Reuters

The deal "will help PepsiCo gain a solid beachhead for expansion into Sub-Saharan Africa by boosting the company's manufacturing and go-to-market capabilities, enabling scale and distribution", the United States company said in a press statement.

Pioneer and PepsiCo have worked together before, and PepsiCo knew the business, and that may have been the attraction for the deal.

The companies on Friday issued a joint statement indicating PepsiCo will acquire all outstanding shares of Pioneer Foods at R110 per share.

USA beverage and food giant PepsiCo has agreed to buy South Africa's Pioneer Foods for about 24.4 billion rand (RM7.4 billion), a company executive said today, in a bold move into the African market.

PepsiCo expects the acquisition to provide a solid position from which to expand into Sub-Saharan Africa.

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The acquisition, valued at about $1.7-billion, will be funded through a combination of debt and cash, and has been unanimously approved by the boards of directors of both companies.

The fact that PepsiCo are paying such a premium sends the message that they are quite keen to get this deal done. As part of this goal, PepsiCo will create a new operating sector for Sub-Saharan Africa, named PepsiCo SSA. The transaction is expected to close by Q1 calendar year 2020.

"This transaction is all about growth".

Shares in agribusiness investment company Zeder Investments (ZEDJ.J), which holds Pioneer as part of its portfolio, also rose more than 22%.

PepsiCo Sub-Saharan Africa will be led by Eugene Willemsen, who most recently served as executive vice-president of global categories and franchise management. The deal is the first major global purchase under new Chief Executive Officer Ramon Laguarta, who took the helm in October, and builds on a $3.2 billion buyout of Israel's SodaStream worldwide Ltd. last August. Fast food brands like KFC and beverage companies like Coca Cola have seen massive gains in the market, entrenching themselves, often at the exclusion of other leading American and European companies. That deal came after PepsiCo's 2008 purchase of a majority stake in JSC Lebedyansky, which sells fruit juices, nectars, and baby food.

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