PepsiCo Sells Off Tropicana, Other Juice Brands In $3.3B Deal

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A security person walks past the entrance of the second-largest European Pepsi plant, near Bucharest
A security person walks past the entrance of the second-largest European Pepsi plant, near Bucharest

PepsiCo (PEP) has sold off its Tropicana, Naked and other select juice brands in North American in a $3.3 billion deal to French equity firm PAI Partners.

Through the deal, PepsiCo will also receive a 39% stake in a newly formed joint venture with PAI and exclusive U.S. distribution right for the juice brands.

“This joint venture with PAI enables us to realize significant upfront value, whilst providing the focus and resources necessary to drive additional long-term growth for these beloved brands,” PepsiCo Chairman and CEO Ramon Laguarta said in a statement.

“In addition, it will free us to concentrate on our current portfolio of diverse offerings, including growing our portfolio of healthier snacks, zero-calorie beverages, and products like SodaStream which are focused on being better for people and the planet,” he added.

As part of the agreement, which is expected to close in late 2021 or early 2022, PAI will also have the first-right option to buy certain Pepsi-branded juice businesses in Europe.

Proceeds from the sale will go to strengthen Pepsi’s balance and be invested back organically into the business, according to the beverage company.

Revenue from PepsiCo’s juice business generated about $3 billion, but fell behind the company’ overall operating margin, according to the company.

PepsiCo reported net sales of $70.37 billion in 2020, with a net revenue growth of 4.8% compared to a year earlier.

Shares of PepsiCo were trading at $156.94 as of 10:56 a.m. EDT on Tuesday, up 62 cents, or 0.40%.

Pepsico Inc. (NYSE: PEP)
On July 21, soft drinks and snacks maker PepsiCo posted a 10 percent growth in its second quarter earnings that met Street expectations.

Core EPS = $1.21; Street estimated = $1.21

Revenue = $16.83 billion; Street estimated = $16.41 billion

"While we are satisfied with the performance of our portfolio overall, the consumer in developed markets continues to be stressed, and the competitive environment in North America beverages has been particularly challenging. We are therefore implementing previously announced incremental pricing actions in the third quarter to more fully cover input costs while continuing to support our brand-building initiatives. We remain confident in our ability to continue to profitably grow our overall business, even in this uncertain economic environment," PepsiCo Chairman and CEO Indra Nooyi said in a statement.

Looking ahead into the fiscal 2011, PepsiCo now targets high-single-digit core earnings per share growth, including an estimated foreign exchange translation gain of about 2 percentage points, from its fiscal 2010 core earnings per share of $4.13. The previous guidance called for 7 to 8 percent core constant currency earnings per share growth and an estimated 1 to 2 percentage point benefit from foreign exchange.

"The revised guidance reflects higher uncertainty on macroeconomic and consumer trends for 2011 and anticipates high global commodity cost inflation and ongoing support of strategic initiatives in emerging markets and of its brand-building activities," the company said.

The company expects to benefit from synergies from the bottler acquisitions and the acquisition of WBD. In addition, the company expects higher net interest expense when compared to last year and a core tax rate of about 27 percent. The company anticipates share repurchases of about $2.5 billion in 2011.
Photo: Reuters

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