FAQs
1) What is the rationale for this
transaction?
Acquiring
The Pepsi Bottling Group and PepsiAmericas will significantly accelerate the
strategic transformation of PepsiCo’s North America Beverage business that is
already underway. A simpler, leaner, faster and more flexible system will
solidify PepsiCo’s position in liquid refreshment beverages and provide
competitive advantages that will better position the company for the
future. Specifically, by consolidating the three companies, PepsiCo can
bring innovative products to market faster while lowering costs for the total
system; consolidate hot-fill and cold-fill manufacturing opportunities which
should yield cost savings for reinvestment in innovation and growth; incubate
niche products to compete better in an increasingly fragmented category; deploy
multiple go-to-market systems that will give us increased flexibility; and
eliminate redundant costs between various systems including headquarters and
back office. In addition, PepsiCo will also be in a better position to
serve the changing needs of its retail and food service customers, to whom it
would be better able to offer enhanced customer service and “Power of One” food
and beverage bundling opportunities.
2)
What are the strategic benefits of reconsolidating?
The
formation of our anchor bottlers a decade ago was the right decision for the
environment at that time when carbonated soft drinks (CSDs) dominated. More
recently, we have seen a proliferation of non-carbonated beverages and
functional beverages based on different manufacturing platforms with different
economics than traditional CSDs. In addition, the consolidation of
retailers demands more responsive customer service. For these reasons, in
this environment, we believe a fully integrated and more agile beverage system
would improve our cost structure, generate stronger top-line growth over the
long term, and more effectively meet the needs of both our customers and
consumers.
3)
What are the financial benefits?
PepsiCo
expects that this transaction would be accretive to earnings-per-share by at
about $0.15 cents per share when synergies are fully realized. By 2012, the
transaction is expected to yield $300 million of pre-tax synergies annually.
Synergies come from overlapping administrative functions; the reduction of
manufacturing and warehouse logistics and other supply-chain costs; the
rationalization of selling and other go-to market functions; and the benefits
from enhanced distribution of our products.
4)
How would your international business benefit from this
transaction?
This
transaction would leverage our scale in Europe to create a stronger
business across the region. We are already joint venture partners in our
very successful businesses in Russia and the Ukraine. We see opportunities
to derive even more synergies than currently in these countries – as well as
with our successful snacks/beverage businesses in Eastern Europe (Poland and
Romania). Our experience internationally tells us that the combination of
snacks and beverages in these emerging markets is a strong positive as
resources, know-how and management capability are shared. In Mexico and
Turkey we will leverage our existing snacks capabilities to generate positive
momentum in sub-scale
beverage
businesses. While the economic downturn is impacting these markets, we
believe they present solid long-term prospects.
5)
What are the terms of the deal?
Under the
agreements, PBG shareholders will have the option to elect either $36.50 in cash
or 0.6432 shares of PepsiCo common stock (which had a value of $36.50 based on
PepsiCo closing share price of $56.75 on July 31, 2009) for each share of PBG,
subject to proration such that the aggregate consideration to be paid to PBG
shareholders shall be 50% cash and 50% PepsiCo common stock. Similarly, PAS
shareholders will have the option to elect either $28.50 in cash or 0.5022
shares of PepsiCo common stock for each share of PAS (which had a value of
$28.50 based on PepsiCo closing share price of $56.75 on July 31, 2009), subject
to proration such that the aggregate consideration to be paid to PAS
shareholders shall be 50% cash and 50% PepsiCo common stock. The total
value of the shares that PepsiCo will be acquiring is about $7.8 billion, and
the acquisitions will create one of the largest food and beverage companies
globally with annual revenues of over $60 billion.
6)
When would the transactions close?
The
transactions are not subject to financing contingencies and they will undergo
customary regulatory approvals, as well as approval of the transaction by
shareholders of PBG and PAS. We expect the transactions to close in late
2009 or early 2010.
Cautionary
Statement
This
communication does not constitute an offer to sell or the solicitation of an
offer to buy any securities or a solicitation of any vote or approval. PepsiCo,
Inc. (“PepsiCo”) and The
Pepsi Bottling Group, Inc. (“PBG”) plan to file with the
Securities and Exchange Commission (“SEC”) a registration statement
on Form S-4 containing a proxy statement/prospectus and other documents with
respect to the proposed acquisition of PBG and a definitive proxy
statement/prospectus will be mailed to shareholders of PBG. PepsiCo and
PepsiAmericas, Inc. (“PAS”) plan to file with the
SEC a registration statement on Form S-4 containing a proxy statement/prospectus
and other documents with respect to the proposed acquisition of PAS and a
definitive proxy statement/prospectus will be mailed to shareholders of PAS.
INVESTORS AND SECURITY HOLDERS
OF PBG AND PAS ARE URGED TO READ THE APPLICABLE PROXY STATEMENT/PROSPECTUS AND
OTHER DOCUMENTS THAT WILL BE FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION.
Investors
and security holders will be able to obtain free copies of the registration
statements and the proxy statements/prospectuses (when available) and other
documents filed with the SEC by PepsiCo, PBG or PAS through the website
maintained by the SEC at http://www.sec.gov. Copies of the documents filed with
the SEC by PepsiCo will be available free of charge on PepsiCo’s internet
website at www.pepsico.com
or by contacting PepsiCo’s Investor Relations Department at 914-253-3035. Copies
of the documents filed with the SEC by PBG will be available free of charge on
PBG’s internet
website
at www.pbg.com
or by contacting PBG’s Investor Relations Department at 914-767-7216. Copies of
the documents filed with the SEC by PAS will also be available free of charge on
PAS’s internet website at www.pepsiamericas.com
or by contacting PAS’s Investor Relations Department at
612-661-3883.
PBG and
its directors, executive officers and certain other employees may be deemed to
be participants in the solicitation of proxies in respect of the proposed
acquisitions of PBG. Information regarding PBG’s directors and executive
officers is available in its Annual Report on Form 10-K for the year ended
December 27, 2008, which was filed with the SEC on February 20, 2009,
and its proxy statement for its 2009 annual meeting of shareholders, which was
filed with the SEC on April 7, 2009. PAS and its directors, executive officers
and certain other employees may be deemed to be participants in the solicitation
of proxies in respect of the proposed acquisitions of PAS. Information regarding
PAS’s directors and executive officers is available in its Annual Report on Form
10-K for the year ended January 3, 2009, which was filed with the SEC on March
4, 2009, and its proxy statement for its 2009 annual meeting of shareholders,
which was filed with the SEC on March 18, 2009. Other information regarding the
participants in the proxy solicitations and a description of their direct and
indirect interests, by security holdings or otherwise, will be contained in the
proxy statements/prospectuses and other relevant materials to be filed with the
SEC when they become available.
Statements
in this release that are “forward-looking statements” are based on currently
available information, operating plans and projections about future events and
trends. They inherently involve risks and uncertainties that could cause actual
results to differ materially from those predicted in such forward-looking
statements. Such risks and uncertainties include, but are not limited to:
PepsiCo’s ability to consummate the acquisitions of PBG and PAS and to achieve
the synergies and value creation contemplated by the proposed acquisitions;
PepsiCo’s ability to promptly and effectively integrate the businesses of PBG,
PAS and PepsiCo; the timing to consummate the proposed acquisitions and any
necessary actions to obtain required regulatory approvals; the diversion of
management time on transaction-related issues; changes in demand for PepsiCo’s
products, as a result of shifts in consumer preferences or otherwise; increased
costs, disruption of supply or shortages of raw materials and other supplies;
unfavorable economic conditions and increased volatility in foreign exchange
rates; PepsiCo’s ability to build and sustain proper information technology
infrastructure, successfully implement its ongoing business process
transformation initiative or outsource certain functions effectively; damage to
PepsiCo’s reputation; trade consolidation, the loss of any key customer, or
failure to maintain good relationships with PepsiCo’s bottling partners,
including as a result of the proposed acquisitions; PepsiCo’s ability to hire or
retain key employees or a highly skilled and diverse workforce; changes in the
legal and regulatory environment; disruption of PepsiCo’s supply chain; unstable
political conditions, civil unrest or other developments and risks in the
countries where PepsiCo operates; and risks that benefits from PepsiCo’s
Productivity for Growth initiative may not be achieved, may take longer to
achieve than expected or may cost more than currently anticipated.
For
additional information on these and other factors that could cause PepsiCo’s
actual results to materially differ from those set forth herein, please see
PepsiCo’s filings with the SEC, including its most recent annual report on Form
10-K and subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not
to place undue reliance on any such forward-looking statements, which speak only
as of the date they are made. All information in this communication is as of
August 4, 2009. PepsiCo undertakes no obligation to update any forward-looking
statements, whether as a result of new information, future events or
otherwise.