Pepsi buys SodaStream for a future beyond cola

Sean Reid
August 21, 2018

Active across several continents, Sodastream makes a machine and refillable cylinders which allows domestic users to make their own carbonated drinks, which is increasingly seen as a healthier alternative to the sugary drinks popular for decades.

PepsiCo said SodaStream complements its water business, which includes Aquafina and smaller brands Bubly and Lifewtr.

The purchase will probably be the last big move by PepsiCo CEO Indra Nooyi, who said this month she's stepping down as head of the beverage company after 12 years in the job.

Under the cash deal, PepsiCo is to pay $144 a share for the fizzy water makers outstanding stock, a premium of 11 percent over its closing price on Friday. The PepsiCo CEO, Ramon Laguarta, claims that he thinks the company will remain in Israel "forever" because "the infrastructure is so powerful".

"Clearly, this is all about growth", Laguarta said, noting that SodaStream would benefit from PepsiCo's resources in research and development, design and distribution.

SodaStream's revenues were $543.4 million, while PepsiCo had revenues of $63.5 billion.

SodaStream was founded in 1903 by London Gin distiller W & A Gilbey.

"We feel very strongly about this partnership and what we can do with it globally", he said.

SodaStream's shares have jumped 85 percent this year after a 78 percent increase in 2017.

In the latest second quarter, revenue grew 31 percent, driven by growth in places including Germany and the United States, while net profit rose almost 82 percent.

Sales of soft drinks, PepsiCo's traditional products, are struggling.

Coca-Cola and Keurig Green Mountain forged a partnership in 2015 to market a counter-top cold-drinks machine, but pulled the plug the following year after it failed to take off.

The acquisition has been unanimously approved by the Boards of Directors of both companies.

If regulators approve the deal, it is expected to be finalised by January 2019, subject to a vote by Sodastream shareholders.

Goldman Sachs acted as financial advisor to PepsiCo and Centerview also acted as financial advisor to PepsiCo.

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