Pioneer makes progress with PepsiCo deal


Pioneer makes progress with PepsiCo deal

Published Date: 2019-10-15 | Source: Stephen Gunnion | Author: Stephen Gunnion

Pioneer makes progress with PepsiCo deal

Shareholders get to vote today on the US food and beverage giant's R110 per share offer.

Pioneer Foods says it has met two of the three conditions set up by PepsiCo for its takeover to advance as shareholders prepare to vote on the deal.

In an update yesterday, the food producer said the US food and beverages giant's R24.4 billion offer was conditional on three material adverse events not occurring. These included the restatement of its financial results and that its 2019 EBITDA wasn't more than 10% below an agreed amount of R2.055 billion. EBITDA - or earnings before interest, tax, depreciation and amortisation - is an important measure of profitability. Pioneer said it expected to meet both criteria, while the third hurdle could only be measured closer to the final date for the takeover.

Pioneer's shareholders will vote on the R110 offer at the group's annual general meeting in Cape Town today. The offer, made in July, came at a 56.5% premium to the 30-day volume-weighted average traded price of Pioneer's shares up to 12 July, the day before it cautioned the market it was in talks.

PepsiCo, which is listed on the US's NASDAQ, plans to use SA as a hub for expansion throughout Africa, while providing Pioneer with access to new markets and improving its ability to compete more effectively in Africa and beyond. Apart from Pepsi-Cola, it owns brands including Mountain Dew, 7UP, Nik Naks, Frito-Lay, Doritos, Simba, Quaker Oats and Tropicana Juice, among others. Pioneer's brands include Sasko bread and flour, Weet-Bix, Liqui Fruit and White Star maize meal.

An independent board set up by Pioneer unanimously recommended the offer and shareholders, including Zeder, holding 52.85% of its stock gave irrevocable undertakings to vote in favour of the deal. The transaction will be implemented through a scheme of arrangement, which requires the approval of shareholders representing 75% of its shares.

Pioneer said the deal would give shareholders an opportunity to dispose of their shares for cash at a big premium and with manageable transaction risks.

If all conditions are met, including shareholder and regulatory approvals, the scheme is expected to be finalised next February.

Its shares rose 0.1% to R107.10 yesterday.

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