Saturday July 20, 2019
Pepsi is joining a slew of companies from various industries that are boosting their presence in Africa. PHOTO: MARIO ANZUONI/REUTERS
JOHANNESBURG—PepsiCo Inc. has agreed to buy South Africa’s Pioneer Foods Group Ltd. for $1.7 billion, as the snack-and-beverage giant looks to build up its business in sub-Saharan Africa.
Pioneer Foods is one of South Africa’s largest producers and distributors of branded food and beverage products, and PepsiCo said it planned to use that market presence as a beachhead for expansion across the continent.
PepsiCo joins a slew of companies from retailers to hotel chains to beer makers that are expanding in Africa. The continent offers businesses the world’s fastest-growing population, a number of swiftly expanding economies and a growing middle class.
“We believe that the African continent represents a tremendous growth opportunity,” Eugene Willemsen, PepsiCo’s newly appointed chief executive for sub-Saharan Africa, said in an interview, citing the continent’s population and expanding economies.
PepsiCo said it would pay 110 South African rand ($7.93) for each Pioneer share, a nearly 42% premium to Thursday’s closing price. The stock traded up 32% on Friday.
The deal is PepsiCo’s second-largest acquisition outside the U.S. since 2010. Last year, the company bought Israel-based SodaStream International Ltd. for $3.2 billion.
Pioneer, which has 22 food and beverage brands, mainly operates in South Africa but exports to more than 80 countries. It reported revenue of about $1.46 billion last year. PepsiCo doesn’t break out its sub-Saharan results; its unit that includes the region plus Europe reported $11.5 billion in revenue for 2018.
PepsiCo said Pioneer’s products—especially cereals, juices and other African food staples—would be
a good fit with its existing offerings in the region. Pioneer’s brands include juices such as Liqui-Fruit and Ceres, as well as Weet-Bix cereal and White Star maize meal flour.
“The portfolios are highly complementary in nature,” Mr. Willemsen said, adding that the focus will be on building up the company’s food business across Africa.
PepsiCo also sees an opportunity to boost its manufacturing and marketing capabilities. Mr. Willemsen said the company would take advantage of the synergies between Pioneer Foods and PepsiCo’s wholly owned South African snack-food manufacturer, Simba (Pty) Ltd.
Pioneer’s beverage brands are quite well known in sub-Saharan Africa, said John Thompson, an analyst at Investec Asset Management in Cape Town, South Africa. That will give PepsiCo a leg up in tapping the growth expected in many African countries, he said. “If you’ve got that 15- or 20-year view, I don’t think you can go too far wrong.”
With the acquisition, PepsiCo said it would expand its sustainable farming program in Africa and work with local farmers to help boost yields, improve livelihoods, and preserve natural resources.
The deal has been unanimously approved by the boards of both companies, but is subject to approval from Pioneer’s shareholders and regulators. The deal is expected to close by the first quarter of 2020.