PepsiCo Completes $7.8bn Strategic Acquisitions Of Two Bottlers

PepsiCo has completed the $7.8bn strategic acquisitions of its two bottlers, The Pepsi Bottling Group and PepsiAmericas. With the completion of the mergers, the company claims to be the largest food and beverage business in North America and the second-largest in the world.

The transactions are expected to create pre-tax synergies of approximately $125m to $150m in 2010 and approximately $400m annually once fully implemented by 2012.

The initial synergies are due principally to greater cost efficiencies, but later years are a balance of cost savings and new revenue-generating opportunities, the company said.

PepsiCo said some of the synergies will be reinvested in high-growth emerging markets, global research and development, and new operating capabilities.

According to PepsiCo, with the mergers it will have a set of strategic advantages, which will provide benefits in North America and Europe, where the bottlers have operations. The company's snacks can be paired with its beverages in the marketplace, enabling PepsiCo to provide better offerings to retail and foodservice customers.

In addition, around 80% of its North American beverage manufacturing, sales and distribution system will be consolidated under one roof, allowing for better operating efficiencies and speed-to-market.

According to PepsiCo, other advantages include: cost savings through consolidation of three public companies into one; ability to leverage the scale and operating experience associated with its Frito-Lay, Quaker, Tropicana and Gatorade operations across its bottling business, and the ability to be well positioned through joint promotions, shared display space, product bundling and shopper insights.

The company added that in Europe and Mexico, it will have better integrated operating systems, with the ability to more quickly implement and execute marketplace programs.

As a result of the merger, the company's PepsiCo Americas Beverages (PAB) segment has been restructured and will comprise of two business units.

Eric Foss will lead the newly combined bottling operations, called Pepsi Beverages Company (PBC) and Massimo d'Amore will continue to lead Gatorade, Tropicana and Latin America Beverages as CEO of PepsiCo Beverages Americas (PBA).

He also remains responsible for PAB marketing and franchise management. The operations of The Pepsi Bottling Group and PepsiAmericas in Europe will be consolidated into PepsiCo Europe, led by CEO Zein Abdalla.

Indra Nooyi, chairman and CEO of PepsiCo, said: Today marks Day One of the new PepsiCo. Bringing together these three great companies enables us to create the industry's fastest, most flexible and most efficient food and beverage system. It will leverage the capabilities of our entire enterprise, what we call The Power of One, to achieve many years of healthy, profitable growth.

This investment opens up a broad range of new growth opportunities around the world, particularly in North America, which accounts for the majority of our revenues and offers the prospect of significant growth. We have approximately 115,000 employees in the US alone, and we are committed to continuing to invest in this critically important market.

Ms Nooyi added, We have devoted the last 10 months to meticulously planning the integration of our companies, and we are fully prepared to launch our new enterprise starting today.

The company reaffirmed previous guidance that it anticipates to achieve 11% to 13% core constant currency EPS growth in 2010. It also said it expects to achieve low-double-digit core constant currency EPS growth in 2011 and 2012.