PepsiCo to buy SodaStream for US$3.2b to cut bottle use

PepsiCo to buy Soda Stream for $3.2 billion

PepsiCo to buy Soda Stream for $3.2 billion

As consumers' tastes change, Purchase, New York-based PepsiCo has launched a sparkling, flavored water brand called Bubly, a nod to the success of drinks like La Croix.

Euromonitor says bottled water sales saw 6.2 percent compound annual growth in the five years to 2017, while carbonated soft drinks sales were flat.

PepsiCo president Ramon Laguarta, who will succeed Ms Nooyi on 3 October, said in a statement that Sodastream was "highly complementary and incremental" to Pepsi's business.

SodaStream Chief Executive Daniel Birnbaum said the deal would open new markets to his company through PepsiCo's global distribution and marketing network, adding that the company would keep its operations in Israel.

Laguarta said PepsiCo committed to keeping Israel the headquarters for 15 years, praising the company's infrastructure and the "amazing" knowhow of factory staff.

A turnaround at SodaStream over the last two years was helped by activist hedge fund manager Teleios Capital Partners, which nominated an external candidate to the board in 2016.

In 1991, the same year SodaStream was founded, PepsiCo finally ended its boycott on the Jewish state and entered the Israeli market. Over the years, many users have used SodaStream only for making fizzy water, without the flavoured syrups it sells.

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.

The deal between Pepsi and Sodastream still needs to clear cursory regulatory hurdles, but PepsiCo plans to pay $144 (£113) cash per SodaStream share in the transaction using cash on hand.

It remains to be seen what Keurig Dr Pepper (KDP.N) will do in the space following the merger last month of coffee company Keurig Green Mountain and Dr Pepper Snapple. It is expected to close by January, pending a SodaStream shareholder vote and certain regulatory approvals.

The move will bring Israeli-based SodaStream International Ltd. under American ownership, and give PepsiCo more points for moving to decrease the amount of plastic flowing into landfills and seas.

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