PepsiCo has agreed to buy fizzy-drinks dispenser SodaStream for $3.2bn, sending the company synonymous with sugary drinks into the homes of more health-conscious consumers.
Pepsi will pay $144 a share in cash for the Israeli company, the companies said in a statement on Monday. That’s 11% higher than Friday’s closing price and would be the company’s largest acquisition in eight years.
In one of her final acts as CEO of Pepsi, Indra Nooyi is betting on a razors-and-blades kind of business model to reanimate revenue growth that has been waning due to weak demand for traditional sugary soft drinks.
SodaStream sells machines used with compatible carbon dioxide capsules and optional flavoured syrups, and its success in locking in customers allowed it to recently raise its full-year outlook. Pepsi said the move was also intended to boost sustainability because consumers filled reusable bottles.
"Time will tell if this is a good move — it caught me by surprise," said Ken Shea, an analyst at Bloomberg Intelligence. "I look at it as less of a synergy and more as an additive to their business portfolio."
SodaStream shares have jumped 49% earlier in August after the company boosted its forecast for revenue growth this year to 23% and reported first-half figures that beat estimates. The stock rose as much as 11% to $143.75 in premarket trading.
With softdrink sales hurting in recent years as consumers shy away from sugary beverages, SodaStream CEO Daniel Birnbaum has shifted the company’s marketing to focus on how the machines can produce carbonated water, without the flavoured syrups.
Other softdrink producers have tried to tap the at-home market, though success has been elusive. Coca-Cola Co ventured into the segment in 2014 when it bought a stake in Green Mountain Coffee Roasters, though the softdrink-making system they developed was discontinued in 2016 due to weak demand.
The purchase will probably be the last big move by Nooyi, who said earlier in August that she was stepping down as head of the beverage company after 12 years in the job.
"Daniel and his leadership team have built an extraordinary company that is offering consumers the ability to make great-tasting beverages while reducing the amount of waste generated," Nooyi said in the statement.
SodaStream has targeted big softdrink makers in adverts in the past, criticising them for making excessive waste. As the stock declined in 2014 and 2015, Birnbaum began the marketing shift away from sugary sodas, and it worked: Pepsi’s bid price is 10 times where the shares were trading less than three years ago.
"SodaStream is highly complementary and incremental to our business, adding to our growing water portfolio," said Ramon Laguarta, who is set to replace Nooyi in October.
The transaction values SodaStream at 36 times trailing 12-month operating profit, compared with a median of 21 times for comparable deals, according to data compiled by Bloomberg.
"Although long established, SodaStream has remained a relatively niche brand," Melanie Felgate, an analyst at GlobalData, said in an e-mailed statement. "With the backing of a global soft-drinks giant, there is an opportunity to propel the concept mainstream"
With Lisa Wolfson
Bloomberg
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