Pepsi to buy Russia's WBD in biggest foray abroad

MOSCOW/NEW YORK (Reuters) - PepsiCo Inc plans to buy 66 percent of Russian juice and dairy company Wimm-Bill-Dann for $3.8 billion in its biggest-ever international acquisition.

The New York-based maker of Diet Pepsi and Frito-Lay snacks will also offer to buy the company's remaining shares after it buys the controlling stake. It values the entire Russian company at $5.4 billion.

Wimm-Bill-Dann's Moscow-listed shares soared 61 percent to 3,710 roubles, while its U.S.-traded shares rose 30.6 percent in premarket trade. Pepsi shares edged up 0.1 percent.

Even though the deal could hit regulatory snags, it is likely to boost sentiment for the Russian consumer products space, said Nomura analyst Mikhail Terentiev.

"The PepsiCo/WBD deal is likely to boost M&A expectations in the food retail space, in our view, where talk is mounting of global operators seeking to enter Russia," Terentiev wrote in a research note.

Due to the size of the deal and Pepsi's projected market share in the Russian beverage market, Terentiev said antitrust regulators could impose certain restrictions and preconditions. He thinks the earliest the deal could be closed is March.

PepsiCo said the deal, which is expected to dilute reported earnings in 2010 and 2011 and add to earnings in 2012, will raise its annual global revenue from nutritious and functional foods to nearly $13 billion from around $10 billion. It also brings it closer to its goal of generating $30 billion in revenue from nutritious food and drinks by 2020.

The price of $33 per American depositary receipt represented a 32 percent premium to the 30-day average trading price of Wimm-Bill-Dann's U.S.-listed shares.

Under Russian law, PepsiCo will have to make a mandatory offer to minority shareholders at conditions that are no worse than those at which the 66 percent stake is being purchased.

The deal will see PepsiCo, which already controls Russian juice maker Lebedyansky, overtake Coca-Cola Co as Russia's biggest juice maker -- a title it lost earlier this year when its U.S. rival bought Nidan, Russia's fourth-largest juice maker.

"This is an unprecedentedly high price for the Russian food market as the Russian consumer market as a whole. Wimm-Bill-Dann has been valued at a multiple of 18 times 2010 EBITDA, which suggests there is an enormous interest from Western strategic investors," Renaissance Capital analyst Natalya Zagvozdina said.

(Reporting by Martinne Geller in New York and Maria Kiselyova in Moscow; Additional reporting by Maria Plis; Editing by Dan Lalor, Dave Zimmerman)