PepsiCo buying Russia's WBD for $5.8 bln
MOSCOW. Dec 2 (Interfax) - PepsiCo has agreed to buy Wimm-Bill-Dann Foods (WDB) for $5.8 billion, one of the Russian dairy and juice giant's biggest co-owners, David Iakobachvili, told Interfax.
"The deal hasn't been under discussion that long - for the last three weeks," Iakobachvili said. He said the timing of its completion would depend on legal formalities, including ant-monopoly approvals.
WBD's shares shot up 31.7% on the MICEX stock exchange to 3,030 rubles each immediately following the news. The RTS stock exchange had to suspend them for the rest of the day at 2:20 p.m. after the stock had risen 34.98%, in other words more than the permitted 30%, to 3,082.64 rubles.
WBD's American Depositary Receipts (ADR) closed Wednesday at $23.61 on the NYSE, valuing the company at $4.2 billion, so PepsiCo is offering to buy WBD at a 38% premium over yesterday's closing price and a 32% premium over the average price for the last 30 days. Trading in New York opens again at 5:30 p.m. Moscow time.
PepsiCo and WBD said in a joint statement that PepsiCo was offering $33 per ADR and $132 per share.
PepsiCo will initially buy 66% of WBD from the company's eight biggest shareholders and from two of its subsidiaries, and then offer to buy out all other shareholders. PepsiCo will pay $3.8 billion for the 66%, valuing the whole company at $5.8 billion.
"Wimm-Bill-Dann is a leader in both traditional and value-added dairy products, with a solid position in juice. The transaction will establish PepsiCo as the largest food-and-beverage business in Russia, make it a leader in the country's fast-growing dairy category and build its presence in key markets in Eastern Europe and Central Asia. It also will raise PepsiCo's annual global revenues from nutritious and functional foods from approximately $10 billion today to nearly $13 billion. This moves the company closer to its strategic goal of building a $30 billion nutrition business by 2020," the statement says.
"Adding Wimm-Bill-Dann to PepsiCo's portfolio is financially attractive and gives us a strong, high-growth platform in the dairy category," said Indra Nooyi, PepsiCo chairman and chief executive officer. "It also gives us clear leadership in the food-and-beverage industry in Russia, a fast-growing, strategically important market offering abundant opportunity. At the same time, Wimm-Bill-Dann's strong, value-added dairy business immediately advances our global nutrition strategy to provide consumers around the world nutritious foods and beverages that are accessible, affordable and advantaged by science. Dairy has a huge, untapped potential to bridge snacks and beverages. We see the emerging opportunity to 'snackify' beverages and 'drinkify' snacks as the next frontier in food and beverage convenience."
"Wimm-Bill-Dann is a terrific business with significant opportunities," said Zein Abdalla, chief executive officer of PepsiCo Europe. "Wimm-Bill-Dann's management team has built an outstanding portfolio of market-leading dairy and juice brands that are loved by consumers across Russia. The combination of Wimm-Bill-Dann and PepsiCo Russia will create a powerhouse business in terms of scale, brand portfolio and system capabilities with the potential to be leveraged across the broader East European and Central Asian region."
"The agreement reached with PepsiCo is a historic one for both our company and our country. Wimm-Bill-Dann was founded just 18 years ago with a handful of employees, who were all based in one room, which saw the birth of our company name, our logo and our first juice brand, J7. Today we have over 16,000 people and 38 production facilities. In this time, Wimm-Bill-Dann has created great juice, dairy and toddler and baby food brands that are among the best loved and recognized in Russia and neighboring countries. Today we announced the planned coming together of our company with one of the most successful and best-known global companies. This represents a tremendous vote of confidence in the future of the Russian market. Integration into PepsiCo also provides our employees with access to a world-class corporate culture and almost unlimited career potential in one of the largest companies in the world," said Sergei Plastinin, chairman of the Wimm-Bill-Dann board of directors and one of the shareholders who agreed to sell shares to PepsiCo.
PepsiCo expects the combination to have the potential for total pre-tax annual run-rate synergies of approximately $100 million by 2014. The transaction will be funded through a combination of internal cash on hand and short-term debt financing, preserving balance sheet flexibility.
The completed transaction, which will be accretive to PepsiCo's top-line and bottom-line growth rates, excluding one-time transaction costs and fees, will bring together PepsiCo's large global food and beverage brands (Pepsi-Cola, Lipton and Lay's), its Russian juice and water brands (Fruktovi Sad, Ya, Tonus, Hrusteam and Aqua Minerale) and Wimm-Bill-Dann's portfolio of leading dairy and juice brands (Domik v Dorevne, Chudo, Imunele, J7, Lubimy Sad, 100% Gold Premium and Agusha).
Upon completion of the full Wimm-Bill-Dann acquisition, PepsiCo's brands will rank first among food and beverage companies operating in Russia, with approximately $5 billion in revenue. PepsiCo will have six of the 20 largest food and beverage brands in Russia, and three of the top 20 overall brands.
PepsiCo will be approximately twice the size of its nearest food and beverage competitor in Russia, with an unmatched distribution platform for its products, including over 200,000 coolers.
PepsiCo will employ approximately 31,000 people in Russia, Ukraine and Central Asia and have 49 manufacturing facilities, making the company one of the largest food and beverage employers in the region and driving economic growth in an already booming marketplace.
PepsiCo will have the Russian food and beverage industry's largest and most capable agricultural team, working in partnership with farmers and leading Russian agricultural research institutes to advance farming practices across dairy, fruit, potatoes and grains.