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4 reasons to love PepsiCos $ 3.2B SodaStream Buy




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A picture taken on August 20, 2018, shows the headquarters of SodaStream, an Israeli carbonates producer in the city of Lod, 1

5 kilometers southeast of Tel Aviv – PepsiCo August 20 Announced SodaStream for $ 3.2 Billion as Beverages and Takeaway Giant Continues to Engage in-Home Products (JACK GUEZ / AFP / Getty Images)

Most mergers fail but PepsiCo's $ 3.2 billion SodaStream deal – a premium of 32% over the closing price on August 17 – will not be one of them.

That's because it survives the four tests for successful takeovers.

Before we go into that, let's take a quick look at the financial performance of both companies (I have no financial interest in the securities mentioned)

PepsiCo, whose longtime CEO Indra Nooyi is leaving in October, has below sin In the five years, sales fell by an average of 0.6%. The company posted growth of $ 63.5 billion, its net income declined -4.7% to around $ 4.9 billion and According to Morningstar, its share fell by 2.6% in 2018 to a market capitalization of approximately $ 162.6 billion.

Meanwhile, Lod, Israel-based SodaStream, which five years ago was distracted from selling soda machines to make soda and now focused on sparkling water, which today accounts for 90% of its business, has achieved much stronger results ,

Over the past five years, revenue has increased by an average of 4.5% to $ 613 million, net profit increased 11.1% to approximately $ 90 million, and in 2018 the stock rose by 85% on market capitalization, according to Morningstar of about $ 2.9 billion.

SodaStream has done better lately. MarketWatch sales increased 31% to $ 171.5 million in the quarter ended June 30, while net income increased 82% to $ 26.1 million.

So why are PepsiCo and SodaStream two good tastes that work better together? Here are four reasons:

Water management is attractive

Bottled water is big business. Between 2014 and 2017, the annual growth rate increased by 9% to $ 200 billion and, according to the Business Research Company, to $ 350 billion by 2021.

In addition, bubbling water has grown far more powerful than the entire bottle water category in the US – according to Beverage Marketing Corp. by 38% in 2017.

SodaStream – whose machine delivers carbon dioxide to reusable bottles that fill consumers with tap water – achieves an attractive net profit margin of 15%. And it makes it easier for consumers who want to reduce their carbon footprint and looks for ways to get bottled water without so many bottles

Combined companies will be better off

This deal will help PepsiCo with it to achieve its goals and gain market share with SodaStream.

SodaStream will assist PepsiCo in its efforts to serve consumers who say they want products that are "better for their bodies and the planet".

As Fortune reports that PepsiCo will grant SodaStream access to about 150 other countries. PepsiCo has tremendous resources and distribution in over 200 countries, which will strengthen SodaStream's assets in relatively poor 46 countries. CEO Daniel Birnbaum said Fortune that the company has only 8% market share and, for example, could use PepsiCo's expertise to gain access to the German market.

The price is high – but can be earned back

Pepsi pays a 32% premium for SodaStream, but if access to distribution channels in 150 other countries adds $ 2 billion to the top line of SodaStream PepsiCo's additional profit would be equivalent to the $ 300 million premium it pays SodaStream's pre-deal market capitalization

Integration is likely to go well

The integration of the two companies is difficult to analyze www.mjfriendship.de/de/index.php?op…27&Itemid=47 Nevertheless, the deal is due to be completed by January 2019 to be continued as an independent division with its current management team – a "setup that both parties deemed necessary to bring Israeli business to their entrepreneurial culture hold, "after Fortune .

Unfortunately, SodaStream's potential revenue will not be enough to move the needle to growth, and it's unclear what Nooyi's replacement will do, which does not seem to be a compelling reason to buy PepsiCo stock.

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A picture of August 20, 2018 shows the headquarters of SodaStream, an Israeli carbonate manufacturer, in the city of Lod, 15 kilometers southeast of Tel Aviv. – PepsiCo said on August 20 that it plans To buy SodaStream for $ 3.2 billion as the beverage and snack giant continues to make inroads with in-home goods. (JACK GUEZ / AFP / Getty Images)

Most mergers fail, but PepsiCos 3, $ 2 billion deal to acquire SodaStream – a premium of 32% over August 17 – will be none of them.

That's because it's over the four tests for successful acquisitions

Before we Let's take a quick look at the financial performance of both companies. (I have no financial interest in the securities mentioned.)

PepsiCo, whose longtime CEO Indra Nooyi resigned in October, suffered from declining sales, profits and stock prices. In the l In the last five years, revenue decreased by an average of 0.6% to $ 63.5 billion, net income declined -4.7% to around $ 4.9 billion and by 2018 the stock dropped 2.6%. market capitalization of approximately $ 162.6 billion, according to Morningstar

Meanwhile, Israel-based Lod is named SodaStream, which five years ago jumped from selling soda water machines to focus on bottled water, which is now 90% In the last five years, sales rose by an average of 4.5% to $ 613 million, net income rose 11.1% to about $ 90 million, and in 2018 its stock rose 85% on Morningstar According to the market capitalization is about 2.9 billion dollars.

SodaStream has done better lately. MarketWatch sales increased 31% to $ 171.5 million in the quarter ended June 30, while net income increased 82% to $ 26.1 million.

So why are PepsiCo and SodaStream two great flavors that work better together? Here are four reasons:

Water management is attractive

Bottled water is big business. Between 2014 and 2017, the annual growth rate increased by 9% to $ 200 billion and, according to the Business Research Company, to $ 350 billion by 2021.

In addition, bubbling water has grown far more powerful than the entire bottle water category in the US – according to Beverage Marketing Corp. by 38% in 2017.

SodaStream – whose machine delivers carbon dioxide to reusable bottles that fill consumers with tap water – achieves an attractive net profit margin of 15%. And it makes it easier for consumers who want to reduce their carbon footprint and looks for ways to get bottled water without so many bottles

Combined companies will be better off

This deal will help PepsiCo with it to achieve its goals and gain market share with SodaStream.

SodaStream will assist PepsiCo in its efforts to serve consumers who say they want products that are "better for their bodies and the planet".

As Fortune reports that PepsiCo will grant SodaStream access to about 150 other countries. PepsiCo has tremendous resources and distribution in over 200 countries, which will strengthen SodaStream's assets in relatively poor 46 countries. CEO Daniel Birnbaum said Fortune that the company has only 8% market share and, for example, could use PepsiCo's expertise to gain access to the German market.

The price is high – but can be earned back

Pepsi pays a 32% premium for SodaStream, but if access to distribution channels in 150 other countries adds $ 2 billion to the top line of SodaStream PepsiCo's additional profit would be equivalent to the $ 300 million premium it pays SodaStream's pre-deal market capitalization

Integration is likely to go well

The integration of the two companies is difficult to analyze www.mjfriendship.de/de/index.php?op…27&Itemid=47 Nevertheless, the deal is due to be completed by January 2019 to be continued as an independent division with its current management team – a "setup that both parties deemed necessary to bring Israeli business to their entrepreneurial culture hold, "after Fortune .

Unfortunately, SodaStream's potential revenue will not be enough to move the needle to growth, and it's unclear what Nooyi's replacement will do, which does not seem to be a compelling reason to buy PepsiCo stock.


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