By Jennifer Robin Raj
BANGALORE (Reuters) - Soft-drink maker PEPSICO (PEP.NY)offered about $6 billion on Monday to buy the shares it does not already own in its two largest bottlers, Pepsi Bottling Group and PepsiAmericas, at the same time as reporting better-than-expected quarterly earnings.
The U.S. company's plan to consolidate its bottling business would give it control of 80 percent of its North America beverage distribution volume.
PepsiCo
The offers consist of $14.75 in cash plus 0.283 shares of PepsiCo common stock for each share of Pepsi Bottling, and $11.64 in cash plus 0.223 shares of PepsiCo for each share of PepsiAmericas.
PepsiCo said it sees pretax synergies of more than $200 million annually, and expects the deal add to its earnings by at least 15 cents a share.
"Non-carbonated drinks, which have different economics and different distribution systems than carbonated soft drinks, have become a much bigger factor in the industry and in our own portfolio," PepsiCo Chief Executive Officer Indra Nooyi said in a statement, adding that the deal will improve its competitiveness and growth prospects.
Pepsi Bottling said it will evaluate PepsiCo's proposal. The bottler was spun off from PepsiCo in 1999 and according to its website, Pepsi Bottling accounts for more than half of the Pepsi-Cola beverages sold in North America and about 40 percent of the Pepsi-Cola beverages worldwide.
According to a regulatory filing with the U.S. Securities and Exchange Commission, as of February 13, PepsiCo's ownership in Pepsi Bottling represented 33.1 percent of the outstanding common stock and 100 percent of the outstanding Class B common stock.
PepsiAmericas advised shareholders to take no action pending review of the proposal by its board.
According to a regulatory filing, PepsiCo owns about 54 million shares in PepsiAmericas, or 43.2 percent of common stock, as of March 10. PepsiAmericas accounts for about 19 percent of all PepsiCo beverage products sold in the U.S.
In some territories, the company sells and distributes products under brands licensed by companies other than PepsiCo. PepsiCo-related revenue accounted for about 80 percent of its total net sales in fiscal year 2008.
PepsiCo also reported better-than-expected quarterly results and reaffirmed its outlook for the year. However, the outlook does not include the impact of the proposed bids for its bottlers.
PepsiCo said its reported earnings per share grew 3 percent, while net revenue fell 1 percent to $8.26 billion.
The company's core earnings were $1.11 billion, or 71 cents a share, for the quarter, while analysts, on average, were expecting the soft drinks maker to earn 67 cents a share, according to Reuters Estimates.
Shares of PepsiCo closed at $52.13 on Friday on the New York Stock Exchange. Pepsi Bottling shares closed at $25.20, while Pepsi Americas shares closed at $19.88.
PepsiCo's financial advisors for the deal were Centerview Partners, Banc of America Securities and Merrill Lynch.
(Reporting by Jennifer Robin Raj in Bangalore; Editing by Rupert Winchester)