PepsiCo to buy bottlers for $7.8 billion

MILWAUKEE --- PepsiCo Inc. said Tuesday that it is buying its two top bottlers for $7.8 billion in a bid to save money and get new products to market more quickly. The deals were sealed months after PepsiCo's first offers were rejected and 10 years after PepsiCo first spun off its largest bottler, Pepsi Bottling Group.

The company spun off its bottler a decade ago so it could concentrate more on the then-booming soft drink business. But in the years since, consumers have gravitated toward more healthful options such as juices and teas, leaving soft drink sales to slump.

That's why the maker of Gatorade and Pepsi wants to own Pepsi Bottling again, and along with it, PepsiAmericas. The world's second-biggest drink maker said the deals will allow it to respond more quickly to the changing market, because consumers' tastes are changing so fast. Controlling the bottlers means it can do that effectively, and it also means it can better control costs and more tightly manage its business.

"We believe we are taking a very important step to strategically reshape the North American beverage business," PepsiCo CEO Indra Nooyi told investors.

PepsiCo Inc. will pay $36.50 per share for the shares it does not own of Somers, N.Y.-based Pepsi Bottling Group and $28.50 per share for the shares it does not own of Minneapolis-based PepsiAmericas.

Both offers are half stock and half cash.

At the time of the Purchase, N.Y.-based company's initial $6 billion offers for the bottlers in April, it owned 33 percent of Pepsi Bottling Group and 43 percent of PepsiAmericas. The bottlers had rejected the offers, saying it undervalued them. Analysts had said the deals would go through if PepsiCo boosted its offer.

PepsiCo believes that owning the bottlers will help it save about $300 million a year by 2012, up from original estimates of $200 million, which analysts had said was too low.