Published: Sat, July 20, 2019
Markets | By Otis Pena

PepsiCo eyes growth in Africa with $1.7bn Pioneer Foods acquisition

PepsiCo eyes growth in Africa with $1.7bn Pioneer Foods acquisition

"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", the company said in a statement.

PepsiCo agreed to buy South Africa's Pioneer Foods Group for about 24.4 billion rand (US$1.8 billion), adding local brands such as Weet-Bix breakfast cereal and Ceres fruit juice to ignite a push across the continent.

PepsiCo has made a $1.7 billion (R23.5 billion) offer to buy South Africa's Pioneer Food Group the companies said on Friday, boosting the target's shares by almost 30%.

PepsiCo offered 110 rand a share for Pioneer, a premium of about 56% over the last closing price before deal speculation began in earnest on Monday, the companies said in separate statements.

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. It is subject to Pioneer Foods' shareholder approval and regulatory approval.

Pretoria-based Pioneer Foods exports to 80 countries in Africa and beyond, and has joint ventures in Namibia, Botswana, Kenya and Nigeria.

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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").

Despite the threat of possible further load-shedding looming over future investments in the country, Treurnicht dubbed the PepsiCo and Pioneer transaction "a vote of confidence in South Africa's future". Bowmans acted as the South African legal counsel to PepsiCo.

I don't think it will be a full-on investor deluge into South Africa, but this does send a good message out there that there are good companies in South Africa and they present a huge opportunity for people to come in and get good businesses at cheap prices.

The deal is the first major global purchase under new Chief Executive Officer Ramon Laguarta, who took the helm in October, and builds on a US$3.2 billion buyout of Israel's SodaStream worldwide last August.

"In the context of share price performance, the company has not been doing well", he said.

PepsiCo sub-Saharan Africa will be led by Eugene Willemsen, formerly PepsiCo's Executive Vice President of Global Categories & Franchise Management.

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