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PepsiCo to Acquire SodaStream for $3.2 billion

Beverage and snack maker PepsiCo announced on Monday that it plans to acquire at-home carbonated drink maker SodaStream for $3.2 billion.

PepsiCo owritten on a web page

The New-York based company agreed to whip out $144 per share in cash for SodaStream’s outstanding stock. This is a 32 percent premium on its 30-day volume weighted average price.

The agreement will give Pepsi a new line through which the company can reach customers in their homes instead of through stores.  The deal comes as US grocers are in a process of transformation, with 70 percent of shoppers anticipated to buy groceries online by the year 2025, according to Food Marketing Institute and Nielsen.

At present, retailers are squeezing brands on price as well as giving increasing shelf-space to upstart and private label brands.

“We get top play in a business—home beverages—where we don’t play,” said PepsiCo CFO Hugh Johnston.

With the decision, PepsiCo is doubling down on its drinks business, which has been floundering in North America since consumers are moving away from sugary, carbonated beverages.

Tel Aviv-based SodaStream makes a machine and refillable cylinders through which the users can make their own soda or carbonated water drinks.

The takeover is one of the boldest moves that CEO Indra Nooyi has made in her 12 years of tenure as CEO in the company. Earlier this year, Nooyi announced her plans to stepping down.  It was her accomplishment that helped steward the company’s shift away from sugary products and introduced healthier alternatives.

She has also spent considerable years of warding off pressure from activist investor Nelson Peltz.

PepsiCo President Ramon Laguarta, 54 years old, will take the position as CEO effective on October 3.

“SodaStream is highly complementary and incremental to our business, adding to our growing water portfolio, while catalyzing our ability to offer personalized in-home beverage solutions around the world,” said Laguarta. “…PepsiCo is finding new ways to reach consumers beyond the bottle.”

As for SodaStream, the agreement is a further chance to broaden its reach through Pepsi’s global footprint.  It currently distributes in 80,000 individual retail stores across 45 countries, with Germany, France, Canada, and the US as its biggest markets.

The company aided in creating the market for in-home soda-making.  However, in recent years, it has also promoted the product as a tool to make carbonated water, suiting the changing tastes.

Such efforts seem to have paid off with the company earlier this month reporting strong quarterly earnings that topped estimates.  The company also tripled its earnings forecast for the year and the news pushed SodaStream shares up over 26 percent.

Sales of its machine gained 22 percent during the quarter, to more than 1 million. Sales of gas refill units climbed 17 percent, to a record 9.7 million.

Before the deal’s announcement, SodaStream shares perked up almost 85 percent since the start of the year.

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