Pepsi has acquired Pioneer Foods Group Limited, the company that owns Nigerian bread brand, Butterfield. The deal is the first major international purchase under Pepsi’s new Chief Executive Officer, Ramon Laguarta.
The American beverage company coughed out $1.8 billion to seal the acquisition of Pioneer Foods, almost a year after it acquired Israel’s SodaStream International Ltd in a $3.2 billion buyout deal in August 2018.
A shock move: The deal came as a surprise, as both Pepsi and Pioneer Foods had ended their partnership four years ago.
[READ ALSO: Akin Alabi questions Jumia’s operating model, Jumia responds]
What this means: The deal will give Pepsi ownership right of Butterfield and sausage-roll brand, Yum Yum, all of which are produced by Food Concepts Pioneer in Nigeria. Food Concepts Pioneer is a subsidiary of Pioneer Foods Group based in South Africa.
It also expands Pepsi’s footprint in Kenya and South Africa. The deal will as expected, see Pepsi takeover all brands under Pioneer Foods Group, including its Corn Flakes and Cereal brands.
The expansion deal with Pioneer provides more manufacturing facilities to Pepsi and milled maize needed for their snacks.
What’s in it for Pioneer? While the deal revives the partnership of both companies, Pioneer will bottle Pepsi products in South Africa, and shareholders are dragged out of their worries, as uncertainty hangs over the company’s stock price on the Johannesburg Stock Exchange.
Pepsi took advantage: The deal came at the time Pioneer Foods Group was struggling with consumer-spending which is dropping in South Africa. The slump in consumer spending has been caused by the country’s high unemployment and rising living costs – and this reflected on the company’s first-half profit which declined.
[READ ALSO: Meet Abdulwasiu Sowami, the silent billionaire who acquired Forte Oil]
Also, the stock price of Pioneer Foods Group is falling in the South African capital market. Three weeks before the deal was announced, Pioneer was trading at 68 Rand (South African currency), the lowest since March 2013.
Although Pioneer Foods Group ended this week with 102.50 Rand after news of the acquisition broke, but Pepsi had offered shareholders 110 Rand a share for Pioneer which was 56% premium at the time of negotiations.
This acquisition offer came at a time shareholders didn’t know when the slump of stock price would last or if it would continue with the trading environment projected to still remain challenging.