PepsiCo buys Pioneer Foods for $1.8 billion in aggressive Africa push

Andrew Cummings
July 20, 2019

The company's shares surged by 29 percent to 100 rand after the details were made public.

Pioneer Foods' manufacturing and go-to-market capabilities will expand the penetration of PepsiCo's products to South African consumers.

PepsiCo Inc. said Friday it has reached an agreement to acquire South AFrica's Pioneer Foods in an all-cash deal valued at about $1.7 billion.

PepsiCo said Pioneer has "a robust, locally relevant product portfolio" that complements its current line-up, with "strong" positions in cereals, juices and other African nutritional food staples, including well-known, scaled brands such as Weet-Bix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko, and White Star.

There is a lot of margin pressure between Pioneer and Tiger Brands because of the aggressive competition in the sector, and because the companies can not recover input costs from the weak consumer.

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.

"Pioneer Foods forms an important part of our strategy to not only expand in South Africa but further into sub-Saharan Africa as well", PepsiCo Chairman and CEO Ramon Laguarta said in a statement.

Pioneer's shares soared 30% to 101.03 rand as of 11:28am in Johannesburg, while Zeder jumped by 23% to a seven-month high.

More transactions like this should happen, going forward, Gryphon Asset Management analyst Casparus Treurnicht told Engineering News Online.

The deal will see PepsiCo expand its Sustainable Farming Program in Africa through which it will work with local farmers in Pioneer Foods' communities to help boost yields, improve livelihoods, and preserve precious natural resources. "We are looking to expand our footprint", said PepsiCo executive Eugene Willemsen, who will manage the USA soft drink and food manufacturer's presence in Africa.

The resulting company would make PepsiCo a leading food and beverage distributor in South Africa, as well as significantly boosting its brand presence in surrounding markets. The company also has joint ventures with firms in Botswana, Kenya, Namibia, and Nigeria.

PepsiCo plans to create a new operating sector for sub-Saharan Africa to oversee Pioneer.

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