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?