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PepsiCo to buy Pioneer Foods Group for $1.7 billion

Christian Fernsby |
PepsiCo announced that it has entered into an agreement to acquire all the outstanding shares of Pioneer Foods Group of South Africa for R110.00 per share in cash (approximately US $1.7 billion).

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That represents a 56% premium to the 30-day volume weighted average price prior to the cautionary announcement on July 15, 2019.

Pioneer Foods has a robust, locally relevant product portfolio that complements PepsiCo's current lineup, with strong positions in cereals, juices, and other African nutritional food staples, including well-known, scaled brands like Weet-Bix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko, and White Star.

At the same time, this acquisition 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.

Finally, this transaction brings together two likeminded companies, with both Pioneer Foods and PepsiCo aligned around a vision for building a more sustainable future and investing in communities.

With Pioneer Foods, PepsiCo adds an extraordinary team of associates who will be instrumental to growth across the continent.

As part of this transaction and PepsiCo's goal to become faster and more locally focused, the company will create a new operating sector for Sub-Saharan Africa ("SSA").

PepsiCo SSA will be led by Eugene Willemsen, who most recently served as Executive Vice President of Global Categories & Franchise Management.

Willemsen, who has been with PepsiCo for nearly 25 years, has extensive experience in growth markets, having previously led the company's businesses in Turkey and South East Europe.

This new structure will not impact PepsiCo's reporting structure, and PepsiCo SSA will remain part of Europe Sub-Saharan Africa ("ESSA") from a financial reporting perspective.

The acquisition, valued at approximately US $1.7 billion, which implies approximately 11x FY2020E consensus EBITDA, will be funded through a combination of debt and cash, and has been unanimously approved by the Boards of Directors of both companies.

The transaction is subject to a Pioneer Foods shareholder vote, certain regulatory approvals, and other customary conditions, and closing is expected by Q1 calendar year 2020.


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