PepsiCo to Acquire Sodastream for $3.2 Billion
On Monday, PepsiCo announced its plans to acquire Sodastream for 3.2 billion dollars.
This Seeking Alpha article describes SodaStream's business model:
First, sell the consumer the starter kit consisting of the carbonated drink maker, an initial bottle of CO2 and some empty bottles and maybe a flavor syrup. After that, the consumers must buy CO2 refills and SodaStream also offers a wide range of syrups from cola flavour to organic elderflower to add to the carbonated water.For this model to be profitable, the user base that buys the high margin refills & flavours is the lifeblood of the company.
CNBC covered the details of the transaction:
New York-based PepsiCo agreed to pay $144 per share in cash for SodaStream's outstanding stock, a 32 percent premium to its 30-day volume weighted average price.
I am no expert in M&A but I believe that PepsiCo will keep SodaStream due to sales growth and the potential for synergies. PepsiCo's sales have been lagging as fewer people consume sugary, carbonated drinks-which are PepsiCo's core products. I believe this acquisition is not a bargain, but if the projected growth is achieved it would be worth the 3.2 billion. This is because SodaStream is not a bottle that consumers buy and discard-it's a product that people use and keep in their homes. This may well enable PepsiCo, as President Ramon Laguarta says, "to reach consumers beyond the bottle" and help PepsiCo develop healthier alternatives (like carbonated water) to bolster core sales. Thus, PepsiCo will be able to further cement its presence in not just American, but foreign households as well.
In addition, PepsiCo recently started their own brand, Bubly, aiming at the same market that SodaStream does. I think that PepsiCo may integrate the two together, as having the two separate would cost them money and waste potential for synergies.
What does the WSO Community think?
1.) What do you think PepsiCo will do with SodaStream? 2.) How do you think PepsiCo can synergize with SodaStream? 3.) Do you think the 3.2 Billion was a good price?
https://www.bloomberg.com/news/articles/2018-08-20/pepsi-analysts-quest…
Looks expensive, could work if they are able to grow Sodastream and cut costs. Sodastream has low geographic representation so using Pepsi's distribution channels could increase sales. Not sure it really supports their healthy drive I mean its not Pepsi sure but you either have it with unhealthy syrups or just water - but why would you buy it to add to just water when you can buy natural sparkling water probably cheaper? Can't say I know the price point of Sodastream products.
Would I be happy with Pepsi if I was a shareholder with this transaction? Probably not but I doubt its going to effect Pepsi shares that much in either direction really.
Could be the result of the company sitting on too much cash. I would have preferred share buy backs if this was the case maybe even dividends.
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