Food and beverages giant PepsiCo makes offer to acquire Pioneer Foods
By Nick Hedley - Jul 19th, 10:18
In a vote of confidence about SA’s long-term prospects, New York-based food and beverages giant PepsiCo has made an offer to buy Pioneer Food Group, which makes Sasko breads and Ceres juices, in a deal worth at least R25.4bn.
In a joint statement, PepsiCo said the deal made sense as Africa “is a key market for future growth”.
“Acquiring Pioneer Foods will increase PepsiCo’s presence in a country and region of high growth potential ... Pioneer Foods forms an important part of PepsiCo’s strategy to expand not only in SA but in sub-Saharan Africa as well.”
The deal “will contribute meaningfully to the growth of the South African economy under its newly elected leadership” and could spur more foreign direct investment, PepsiCo said.
Pioneer said it will gain access “to leading research and development and brand expertise, along with global scale and distribution”.
PepsiCo will offer Pioneer’s owners, including Zeder Investments, at least R110 a share, Pioneer said on Friday. An independent board at Pioneer recommended that investors accept the offer, which already had the support of 52.9% of shareholders, including Zeder.
Both Pioneer and Zeder’s shares rallied on Thursday, with Pioneer’s stock closing 6.3% up at R77.60.
PepsiCo is already represented in SA by brands including Simba, Nik Naks, Lays, Doritos, Pepsi, and 7UP.
Independent analyst Anthony Clark said while the offer price seemed fair, PepsiCo was buying “a great company with strong brands at the lowest ebb of its earnings cycle” and ahead of an expected earnings recovery. The offer price was also less than half of Pioneer’s 2015 highs of more than R210 a share.
But Pioneer would benefit from having a “rich parent” that could “take it to the next level”, Clark said.
Zeder, meanwhile, was “selling the family silver”. Clark said the investment company could use the proceeds to pay down its debt of about R1.5bn and pay a special dividend to shareholders, including PSG. It may also make another bid for Kaap Agri, he said.
Pioneer’s shares opened 28.1% higher at R99.40 on Friday, while Zeder rose 27.2% to R5.05.Business Live
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