PepsiCo has agreed to buy out South Africa's Pioneer Foods Group for about $1.8 billion US dollars.
PepsiCo offered R110 ($7.94) per Pioneer Foods ordinary share, the companies said, with the news lifting the South African company's shares by 28.8% to nearly R100.
The deal "will help PepsiCo gain a solid beachhead for expansion into Sub-Saharan Africa by boosting the company's manufacturing and go-to-market capabilities, enabling scale and distribution", the USA company said in a press statement. Articles appear on euronews.com for a limited time.
Pioneer Foods, which is listed locally on the Johannesburg Stock Exchange, noted the "firm intention" to purchase by PepsiCo in a Sens statement and that the transaction is one of PepsiCo's largest outside of the US.
The PepsiCo-Pioneer Food Group deal recalls a strategic move by Coca-Cola in 2014 in which Coke said it would invest $17 billion in Africa from 2010 through 2020.
The acquisition, valued at about $1.7-billion, will be funded through a combination of debt and cash, and has been unanimously approved by the boards of directors of both companies.
In addition to expanding PepsiCo's reach, the acquisition gives the company "a portfolio of well-established local brands - including well-known, scaled brands like Weet-Bix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko and White Star - providing [PepsiCo] with a significant runway of locally-relevant products", according to analysis from Wells Fargo.
Global food giant PepsiCo and South African Pioneer Foods have announced plans for a deal worth around R24 billion - the biggest ever for the U.S. company outside its home country. It is subject to Pioneer Foods' shareholder approval and regulatory approval. Acquiring Pioneer Foods would increase PepsiCo's presence in a country and region of high growth potential.
Tertius Carstens, the CEO of Pioneer Foods, said: "Today's announcement marks a very exciting milestone for Pioneer Foods and our people, and highlights the strength of what we have created".
More transactions like this should happen, going forward, Gryphon Asset Management analyst Casparus Treurnicht told Engineering News Online.
He added that while investors should not necessarily "rush out and buy a whole lot of South African labels", deals like the PepsiCo and Pioneer transaction "make ideal sense".
It's great to see some investment interest in South African shares.
While Pioneer exports to a host of countries, most of its operations are in South Africa.