PepsiCo puts fizz into healthy drinks with $3.2bn SodaStream deal

PepsiCo will buy carbonated drink-machine maker SodaStream for $3.2 billion as it battles Coca-Cola for an edge in the health-conscious beverage market.

Founded in Britain in 1903, SodaStream was a coveted device in British kitchens in the 1970s and 80s, allowing people to create fizzy drinks by adding flavoured syrups to carbonated tap water, but its popularity faded as bottled soft drinks became cheaper.

The Israel-based company now markets itself as a sparkling water maker to appeal to younger and more health- and environmentally-conscious consumers, who do not drink much sugary soft drinks.

"With sugary carbonates and juices struggling and no turnaround in sight, mitigating the losses through newer and healthier products will be essential for PepsiCo," said Euromonitor International analyst Matthew Barry.

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

The deal announced on Monday may be the last for PepsiCo chief executive Indra Nooyi, who hands over to Ramon Laguarta later this year.

Cash on hand

PepsiCo will pay $144 per SodaStream share in cash, representing a 10.9 per cent premium to Friday’s closing price of SodaStream’s US-listed stock and a 32 per cent premium to its 30-day average. The New York-based group will fund the deal with cash on hand.

SodaStream’s US-listed shares were up 10.5 per cent in pre-market trading.

PepsiCo said SodaStream complements its water business, which includes Aquafina and smaller brands Bubly and Lifewtr. The company is also experimenting with other non-bottled drinks, including Drinkfinity, which is sold in pods.

PepsiCo said the transaction, unanimously approved by the boards of both firms, was expected to close by January 2019. It said the purchase was another step in its bid to “promoting health and wellness through environmentally friendly, cost-effective and fun-to-use beverage solutions”.

Jumped

SodaStream’s shares have jumped 85 per cent this year after a 78 per cent increase in 2017 and have moved to $130 from $16.31 at the end of 2015.

In second-quarter results issued earlier in August, SodaStream’s revenue grew 31 per cent, driven by growth in Germany, France, Canada and the United States, while net profit rose nearly 82 per cent.– Reuters