Pepsico Inc. (PEP) the global food and Drinks Corporation, announced that it will buy the remaining 23% of Wimm-Bill-Dann Foods OJSC (WBD), Russia's leading branded food and beverage company. Wimm-Bill-Dann produces dairy products, juices, mineral water and baby food.
The global soft drink giant haddelivered a ‘squeeze-out demand’ notice to Wimm-Bill-Dann Foods on June 30, 2011. As stated in the ‘squeeze-out demand’ notice, all registered holders of ordinary shares as on August 15, 2011 will be entitled to receive 3,883.70 Russian rubles per share, similar to that offered to WBD shareholders in PepsiCo's recently completed tender offer in Russia.
Pepsi had acquired 77% of the company in February, 2011 for approximately $3.8 billion. The purchase helped to boost PepsiCo's Q1 revenues by 27% year over year. Wimm-Bill-Dann, the owner of brands like Chudo dairy products and Agusha baby food that has almost doubled its sales since 2005, was a lucrative addition for Pepsi at such a point.
The latest deal is expected to close in September 2011. Once the deal is complete, Pepsi will own the largest food-and-beverage business in Russia. The retail giant will enjoy a strong foothold in the fast-growing Eastern European and Central Asian markets in days to come. This brings the company closer to its strategic goal of building a $30 billion nutrition business by 2020.
The company has diversified beyond fizzy caffeinated drinks. The Frito-Lay division of salty snacks that includes Tostitos, Lay's chips and Doritos has been part of PepsiCo for many years. Gatorade sports drinks, Tropicana juices and Quaker oatmeal products also contribute to the top line, which grew 34% last year to $57.8 billion.
Both the beverage retail giants, Pepsi and Coca Cola Company (KO) are keen on expanding business in the Russian market, whose economy is estimated to grow by 3.8% in 2011. However, companies forecast Russia’s dairy market to expand at a low-double-digit rate for at least the next three years.
Coca-Cola purchased a controlling stake in Nidan in 2010. Coca-Cola Hellenic Bottling Co. and Nidan held a 35% share in the Russian juice sales by volume in 2009 compared to PepsiCo and WBD, who captured 42% according to Euromonitor Plc.
New York-based PepsiCo entered the Russian market in 1974 and has pumped $3 billion into the market in the past decade. Just before this deal Pepsi tookover 75.53% of Lebedyansky, Russia's leading juice producer, for $1.4 billion.
Pepsico holds a Zacks #3 Rank, translating into a short-term Hold rating.
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