PepsiCo to buy South Africa’s Pioneer Food for $1.7bln

PepsiCo Takes Africa Foothold With $1.8 Billion Pioneer Deal

Multinational snack foods and beverage giant PepsiCo has entered into an agreement to acquire South Africa's Pioneer Foods Group for approximately $1.7 billion (R23.5 billion).

The company's shares surged by 29 percent to 100 rand after the details were made public.

"As we look to accelerate our growth in key markets around the world and achieve our vision to Be the Global Leader in Convenient Foods and Beverages by Winning with goal, we are absolutely thrilled to join forces with Pioneer Foods, one of South Africa's leading food and beverage companies", said Laguarta. It is subject to Pioneer Foods' shareholder approval and regulatory approval.

"Pioneer Foods forms an important part of our strategy to not only expand in South Africa but further into sub-Saharan Africa as well", PepsiCo Chairman and CEO Ramon Laguarta said in a statement.

In particular, food and Beverage giant PepsiCo has struggled to create a substantial market niche for itself against its other Western competitors. "We are looking to expand our footprint", said PepsiCo executive Eugene Willemsen, who will manage the USA soft drink and food manufacturer's presence in Africa.

The acquisition represents a 56% premium to the 30-day volume-weighted average prior to July 15, when Pioneer issued a cautionary announcement stating that it was in discussions regarding a potential transaction.

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More transactions like this should happen, going forward, Gryphon Asset Management analyst Casparus Treurnicht told Engineering News Online. That deal came after PepsiCo's 2008 purchase of a majority stake in JSC Lebedyansky, which sells fruit juices, nectars, and baby food.

"Following a disastrous period of economic growth under the rule of the African National Congress and [former President] Jacob Zuma, South African entities are valued at low multiples", he explained.

I don't think it will be a full-on investor deluge into South Africa, but this does send a good message out there that there are good companies in South Africa and they present a huge opportunity for people to come in and get good businesses at cheap prices.

The acquisition will help PepsiCo's plans to expands into the rest of Africa.

Shares in agribusiness investment company Zeder Investments, which holds Pioneer as part of its portfolio, also rose more than 22%.

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