PepsiCo Plans $3.2 billion Acquisition of SodaStream

US food group PepsiCo Inc. will venture into the home beverage business, as it makes plans to acquire Israeli at-home carbonated drink maker SodaStream International Ltd. through a $3.2 billion deal.

The food and beverage titan has agreed to pay $144 per share in cash for SodaStream’s outstanding stocks, representing a 10.9 percent premium to Friday’s closing price of the company’s US-listed stock and a 32 percent premium to its 30-day volume weighted average price.

The New York-based manufacturer has also committed to keep SodaStream in Israel for at least 15 years. The transaction is expected to close by January 2019, subject to SodaStream shareholder vote and regulatory approvals.   

It has long been speculated that PepsiCo will be buying SodaStream given their longstanding relationship. Since 2015, SodaStream has been selling caps for Pepsi and Sierra Mist drinks on the platform.     

PepsiCo has held talks with SodaStream many times in the past, but it wanted to make sure its business was stable before forming a contract.   

The agreement comes several weeks after news of PepsiCo Chief Executive Indra Nooyi stepping down from her position was announced. Nooyi will remain as chairman of PepsiCo and will hand over CEO duties to PepsiCo President Ramon Laguarta on October 3.

The move also comes at time when US grocers undergo transformation, with 70 percent of consumers expected to purchase groceries via online platforms by 2025.

PepsiCo and SodaStream Expanding Further

Acquiring the carbonated drink-machine maker means PepsiCo will now be able to reach customers beyond stores and the bottle, as well as help it up its ante in the battle for an edge in the health-conscious beverage market.

PepsiCo Chief Financial Officer Hugh Johnston stated that the deal allows them to play in a business—home beverages—where they do not play.

PepsiCo’s beverage division had a hard time in North America as consumers shifted away from sugary, carbonated drinks.

With sugary carbonated and juices struggling and no turnaround in sight, mitigating the losses through newer and healthier products will be essential for PepsiCo, according to analyst Matthew Barry.

Data from market research firm showed bottled water sales posted a 6.2 percent compound annual growth in the five years to 2017, while carbonated soda sales were flat.   

Laguarta said SodaStream complements PepsiCo’s water business, which includes Aquafina and smaller brands Bubly and Lifewtr, adding that SodaStream is attractive due to its rapid growth and its ability to allow people to customize their drinks.

For SodaStream, the deal further strengthens its opportunity to broaden its reach through PepsiCo’s global footprint. The company now supplies 80,000 individual retail stores across 45 countries, with its key markets including Germany, France, Canada, and the US.

Laguarta also noted that the carbonated drink-machine maker would benefit from PepsiCo’s resources in research and development (R&D), as well as in design and distribution.

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