/ 19 July 2019

PepsiCo offer boosts Pioneer’s share price

The multinational food company said it has entered into an agreement to acquire all outstanding shares of Pioneer Food Group for R110 per share.



South Africa’s food company Pioneer Foods’ share price increased by about 30% from R77.62 yesterday to R100.98 on Friday after the announcement that American multinational food, snack, and beverage corporation PepsiCo will purchase the company for approximately $1.7-billion (R24-billion). 

The multinational food company said it has entered into an agreement to acquire all outstanding shares of Pioneer Food Group for R110 per share, a 56.5% premium as of July 12.

Pioneer Foods — which manufactures Weetbix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko and White Star — is one of the largest South African producers and distributors of a range of branded food and beverage products and posted revenue of R20.2-billion in 2018.

Independent analyst Theo Botha says the purchase cannot wholly be seen as a good thing for the country.

“Its positive in terms of a foreign company coming to South Africa buying one of of our biggest food companies.”

But he says it could also mean, “the price might be cheap and maybe our equities are cheap and we will now see more foreign buying,” thus creating an “ideal buying opportunity for overseas companies and obviously that means they are taking dividends out of the country”.

He says in 2015, Pioneers Food’s share price was R205 and it has been on the decline in recent years.

“In the context of share price performance, the company has not been doing well,” he said.

In a statement, the company says the acquisition will help PepsiCo expand into African markets.

“Pioneer Foods represents a differentiated opportunity for PepsiCo and allows us to immediately scale our business in Africa. Pioneer Foods forms an important part of our strategy to not only expand in South Africa, but further into sub-Saharan Africa as well,” Ramon Laguarta, chairman and chief executive of PepsiCo said in a statement.

“Our businesses are highly complementary, and we look forward to working with the Pioneer Foods team to successfully build and implement a shared vision in the region.”

For its part the local food manufacturer sees the sale as an opportunity to amplify their brand offering to other parts of the world while boosting local agriculture.

“As part of PepsiCo, we will have greater scale to expand our leading brands, greater capital to invest in local agriculture and people, greater access to leading global capabilities and a partner committed to taking our company to even greater heights,” said Tertius Carstens chief executive of Pioneer Foods.

The purchase will be funded through a combination of debt and cash, and has been unanimously approved by the boards of both companies, PepsiCo said.

The transaction is subject to a Pioneer Foods shareholder vote, certain regulatory approvals, and other customary conditions, and closing is expected by the first quarter of 2020.