PepsiCo is pressing ahead into the African food market, agreeing to acquire Pioneer Foods Group of South Africa in a bid to expand its international growth.
The approximately $1.7 billion transaction, announced today, will give PepsiCo control of one of South Africa’s biggest food and beverage producers. Known for brands such as Weet-Bix, Liqui-Fruit, and White Star, Pioneer distributes products in more than 80 countries in Africa and other parts of the world. The company also has joint ventures with firms in Botswana, Kenya, Namibia, and Nigeria.
PepsiCo plans to fund the cost of the acquisition, which represents a 56% premium over Pioneer’s last closing price before the deal was announced, with a combination of debt and cash. The companies expect the transaction to be finalized in early 2020. Both companies’ boards have approved the deal, which will need regulatory and other approvals.
In a joint statement, PepsiCo and Pioneer described the combination as bringing together two companies that would mesh well together. “Our businesses are highly complementary, and we look forward to working with the Pioneer Foods team to successfully build and implement a shared vision in the region,” PepsiCo Chairman and CEO Ramon Laguarta said in the statement.
PepsiCo plans to create a new operating sector for sub-Saharan Africa to oversee Pioneer. The unit, PepsiCo SSA, will be part of PepsiCo’s Europe and Sub-Saharan Africa division.
“This transaction is all about growth. We are looking to expand our footprint,” said PepsiCo executive Eugene Willemsen, who will manage the U.S. soft drink and food manufacturer’s presence in Africa.
The deal signals PepsiCo’s confidence in a region where food companies have faltered in the face of weak consumer spending and adverse weather conditions, factors which have weighed on Pioneer’s earnings this year, Reuters reported.
The deal for Pioneer, which PepsiCo said would help it expand in sub-Saharan Africa by giving it access to Pioneer’s manufacturing and distribution facilities, continues PepsiCo’s push to expand its global footprint. It follows the company’s purchase last year of SodaStream International, an Israeli supplier of homemade soft drink equipment.
PepsiCo became the largest food and beverage company in Russia in 2011, when it took control of Wimm-Bill-Dann Foods, a Russian dairy products supplier. That deal came after PepsiCo’s 2008 purchase of a majority stake in JSC Lebedyansky, which sells fruit juices, nectars, and baby food.
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