PepsiCo to buy Pioneer Foods, position for SSA growth
PepsiCo has entered into an agreement to acquire all the outstanding shares of Pioneer Foods Group for R110 per share in cash (approximately US$1.7bn), which represents a 56% premium to the 30-day volume weighted average price prior to the cautionary announcement on 15 July 2019.
The Pioneer Foods stable includes well-known cereals, juices, and other nutritional food staples such as Weet-Bix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko, and White Star. The 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.
“As we look to accelerate our growth in key markets around the world and achieve our vision to ‘Be the Global Leader in Convenient Foods and Beverages by Winning with Purpose’, we are absolutely thrilled to join forces with Pioneer Foods, one of South Africa’s leading food and beverage companies,” says Ramon Laguarta, PepsiCo chairman and CEO.
“Pioneer Foods represents a differentiated opportunity for PepsiCo and allows us to immediately scale our business in Africa. Pioneer Foods forms an important part of our strategy to not only expand in South Africa but further into sub-Saharan Africa as well. Our businesses are highly complementary, and we look forward to working with the Pioneer Foods team to successfully build and implement a shared vision in the region.”
“Today’s announcement marks a very exciting milestone for Pioneer Foods and our people, and highlights the strength of what we have created,” says Tertius Carstens, Pioneer Foods CEO. “As part of PepsiCo, we will have greater scale to expand our leading brands, greater capital to invest in local agriculture and people, greater access to leading global capabilities and a partner committed to taking our company to even greater heights.”
New operating sector
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. PepsiCo SSA will be led by Eugene Willemsen, who most recently served as executive VP of global categories and 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 from a financial reporting perspective.
The acquisition 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 2020.