PepsiCo Grows Footprint in Russia With $3.8B Deal

PURCHASE, N.Y. -- One of the largest food and beverage companies is poised to get a little bigger now that PepsiCo is acquiring 66 percent of Russia’s Wimm-Bill-Dann Foods OJSC for $3.8 billion. The deal hinges on government approvals.

"Adding Wimm-Bill-Dann to PepsiCo’s portfolio is financially attractive and gives us a strong, high-growth platform in the dairy category," Indra Nooyi, PepsiCo chairman and chief executive officer said in a released statement. "It also gives us clear leadership in the food and beverage industry in Russia, a fast-growing, strategically important market offering abundant opportunity. At the same time, Wimm-Bill-Dann’s strong, value-added dairy business immediately advances our global nutrition strategy to provide consumers around the world nutritious foods and beverages that are accessible, affordable and advantaged by science. Dairy is a huge untapped potential to bridge snacks and beverages. We see the emerging opportunity to ‘snackify’ beverages and ‘drinkify’ snacks as the next frontier in food and beverage convenience."

In connection with the move, PepsiCo will offer to acquire the remaining share of Wimm-Bill-Dann through an offer following the completion of the $3.8-billion acquisition at such time and on terms as mandated by Russian law, and PepsiCo may acquire additional shares on other transactions, according to a release on the deal.

Wimm-Bill-Dann is in the traditional and value-added dairy products market, with a solid position in juice. Once the deal is finalized, PepsiCo will become the largest food and beverage business in Russia. In addition, the locally headquartered company will build its presence in Eastern Europe and Central Asia, as well as make it a key player in Russia’s fast-growing dairy category. In a larger perspective, the deal is a step toward PepsiCo’s strategic goal of establishing a $30-billion nutrition business by 2020.

Financially speaking, the $3.8 billion PepsiCo will pay for the 66 percent stake in the Russian company implies a total enterprise value of approximately $5.4 billion, according to a joint release. The price being paid to the selling shareholders is $33 per ADR share, equivalent to $132 per ordinary Russian share.

"Wimm-Bill-Dann’s management team has built an outstanding portfolio of market-leading dairy and juice brands that are loved by consumers across Russia," said Zein Abdalla, chief executive officer of PepsiCo Europe. "The combination of Wimm-Bill-Dann and PepsiCo Russia will create a powerhouse business in terms of scale, brand portfolio and system capabilities with the potential to be leverage across the broader East European and Central Asia region."