Thursday, May 7th, 2009
* Says bid is not in shareholders’ best interest
* Extends shareholder rights plan
* Shares of PepsiAmericas down 3 cents at $25.18 (Adds analyst comment in paragraphs 9-10, updates stock prices)
PHILADELPHIA, May 7 (Reuters) - PepsiAmericas Inc (PAS.N: Quote, Profile, Research, Stock Buzz) rejected an unsolicited takeover bid from PepsiCo Inc (PEP.N: Quote, Profile, Research, Stock Buzz), following the lead of larger bottler and fellow takeover target Pepsi Bottling Group Inc (PBG.N: Quote, Profile, Research, Stock Buzz).
PepsiCo said it believed its offers were “full and fair” and in the best interest of the bottling companies’ shareholders.
PepsiAmericas on Thursday said PepsiCo’s bid “significantly undervalues the strategic benefits of system consolidation ... and the synergies that can be obtained in the proposed transaction.”
It also said the offer failed to reflect the value of the company’s strengths and stand-alone strategies, citing its better-than-expected first-quarter results.
The widely expected rejection follows a similar stand on Monday by Pepsi Bottling, which called PepsiCo’s offer “grossly inadequate.”
PepsiCo has offered a total of $6 billion to buy the remaining stakes in its two largest bottlers in an attempt to cut costs and secure more control of its distribution system. PepsiCo currently owns 33 percent of Pepsi Bottling and 43 percent of PepsiAmericas.
PepsiCo offered $29.50 per share for Pepsi Bottling and $23.27 per share for PepsiAmericas—17 percent premiums over the target companies’ closing share prices the day before the offers were made.
The bottlers’ shares have been trading above the offer prices since the proposals were made last month.
“We would expect the companies to negotiate,” ConsumerEdge Research analyst Bill Pecoriello said.
“They have to negotiate somewhere between what Pepsi offered and what the bottlers think their intrinsic value is. The ultimate agreement will probably be somewhere in between those two. We still expect the transaction to get done,” Pecoriello said.
Analysts have said PepsiCo could afford to pay between $38 and $44 a share for Pepsi Bottling, and about $28 a share for PepsiAmericas.
PepsiCo has said both bottling companies must agree to a deal or it will not buy either of them.
A sticking point among the companies is the amount of synergies or cost-saving and revenue benefits PepsiCo would gain through acquiring the two bottlers.
PepsiCo estimated synergies would total about $200 million, while Pepsi Bottling said the benefits would be “multiples” higher than that.
Pecoriello previously estimated that PepsiCo could see $600 million to $800 million in synergies from the deal.
Separately, PepsiAmericas also extended by one year its shareholder rights plan, which now expires May 20, 2010. The takeover defense, also known as a poison pill, would make it costly for any unwanted suitor to make a hostile takeover bid.
Shares of PepsiAmericas shed 3 cents to $25.18 in afternoon trading, while Pepsi Bottling shed 2 cents to $32.03. PepsiCo shares shed 18 cents to $49.54. (Reporting by Martinne Geller in New York and Jessica Hall in Philadelphia, editing by Maureen Bavdek, John Wallace and Gunna Dickson)
