PepsiCo files lawsuit as US bottling groups unveil M&A plans

Both Pepsi Bottling Group (PBG) and PepsiAmericas have announced M&A activity in the past week as they attempt to fight off a hostile takeover by PepsiCo worth around $6bn. Both companies have rejected the offers on the grounds that they undervalue their businesses.

However, the battle has not put the brakes on expansion for either PBG, which has sales of $13.8bn, or the $4.9bn-turnover PepsiAmericas.

PepsiAmericas yesterday announced a joint venture deal to combine its Caribbean businesses with Central American Beverage Corporation’s (CABCORP) operations in Guatemala, Honduras, El Salvador and Nicaragua. The deal is designed to enlarge PepsiAmericas’ footprint and give it a platform to operate in the high-growth Latin American markets.

PBG, meanwhile, last week announced that it planned to buy a smaller bottler, Pepsi-Cola Bottlers, in Massachusetts. A letter of intent has been signed and the deal is, according to PBG, expected to close in the autumn.

Both deals have been announced in the week after PepsiCo filed a lawsuit against PBG claiming that the bottler had acted illegally in its rejection of the hostile takeover bid last month.

PepsiCo alleges that members of its staff who are also PBG board members were not invited to a PBG board meeting to discuss PepsiCo’s offer to buy the 66% of the company it does not own.

PepsiCo is also furious that PBG approved a shareholder rights plan – otherwise known as a ‘poison pill’ – to fight the takeover bid.

A statement from PBG on the lawsuit said: PepsiCo has filed a lawsuit that is entirely without merit in an attempt to divert attention from its grossly inadequate proposal.

PepsiCo’s bid to buy out PBG and the 57% of PepsiAmericas that it does not own would give it control of 80% of its distribution and bottling in North America.

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