MOSCOW, March 20, 2008 – PepsiCo (NYSE: PEP) and The Pepsi Bottling Group (NYSE: PBG) today announced that they have agreed to jointly acquire a 75.53% stake in Russia’s leading branded juice company JSC Lebedyansky (RTS: LEKZ), excluding the company’s baby food and mineral water business, for US$ 1.4 billion.
Lebedyansky is the world’s sixth-largest juice manufacturer and the largest in Russia, with an estimated market share in Russia of around 30% and annual revenues in 2007 of approximately $800 million from its juice business.
“This agreement provides us with a strong platform for continued expansion in one of the world’s fastest growing juice markets and advances the global transformation of PepsiCo’s product portfolio,” said Michael White, PepsiCo International CEO and vice chairman of PepsiCo. “Combining Lebedyansky’s strengths with those of PepsiCo, one of the world’s largest makers and sellers of branded juice, and The Pepsi Bottling Group, our largest bottler, will create vast opportunities. We are committed to investing in Lebedyansky’s brands and building an even brighter future for this great Russian company.”
Lebedyansky Chairman Yuri Bortsov, one of the shareholders who have agreed to sell their Lebedyansky shares to PepsiCo/PBG, said: “We are pleased to have reached this agreement with PepsiCo and PBG, outstanding companies that bring a long heritage of investing in Russia and a clear commitment to the growth and success of Lebedyansky. They will bring significant investment and distribution strength and ensure that this company remains a strong, vibrant competitor.”
Under agreements reached, PepsiCo and PBG will acquire the 75.53% of Lebedyansky held by its four largest individual shareholders. That purchase will be split 75%/25% by PepsiCo and PBG, respectively.
The approximately US$ 1.4 billion PepsiCo and PBG will pay to acquire the stake in Lebedyansky implies a total enterprise value for Lebedyansky, including debt and spin-off related adjustments, and excluding the company’s baby food and mineral water business, of approximately US$ 2 billion.
The acquisition is subject to normal regulatory approvals and the spin-off to Lebedyansky’s existing shareholders of the company’s baby food and mineral water business, which is not being acquired by PepsiCo and PBG. The spin-off is subject to agreement by the majority of Lebedyansky shareholders
As required by Russian law, and subject to the successful completion of the spin-off, PepsiCo and PBG will make a mandatory offer to purchase the shares held by all remaining shareholders in Lebedyansky shortly after the transaction closes. Upon completion of the mandatory offer, the two companies’ stake in Lebedyansky may become as high as 100%.
Additional terms of the agreement were not disclosed. PepsiCo and PBG indicated the transaction will not materially affect their previously provided guidance for 2008.
PepsiCo’s history in Russia goes back to 1959, when former PepsiCo Chairman and CEO Donald M. Kendall first showcased Pepsi-Cola at an exhibition of American products in Moscow, where Soviet Premier Nikita Khrushchev sampled Pepsi for the first time.
Fifteen years later, in 1974, the first Pepsi-Cola bottling plant in Russia opened in Novorossiysk, establishing Pepsi as the first Western branded consumer product to be produced in the country. In recognition of that historic event, PepsiCo’s Board of Directors held a meeting in nearby Abrau-Durso, believed to be the first such meeting by a U.S. company.