On December 2, Wimm-Bill-Dann Foods reached an agreement with PepsiCo for the sale of the Russian company to the American corporation for USD 5.8 billion. Wimm-Bill-Dann Foods is one of the biggest dairy and juice producers in Russia. According to David Iakobachvili, one of the largest shareholders of Wimm-Bill-Dann, the negotiations on the takeover transaction lasted only three weeks. The timing for the consummation of the deal will depend on the completion of legal and regulatory procedures, such as receiving approval from the Russian Federal Anti-monopoly Service.     

Following the news of Pepsi’s decision to purchase Wimm-Bill-Dann, the value of the Russian company’s shares increased 31.7 percent on the MICEX currency exchange. Once the price of the stock increased 34.98 percent, the RTS stock exchange suspended the company’s listing for the end of the day, as the maximum permitted variation in price on any given day is 30 percent. The value of the stock increased to RUR 3 082.64 a share.    

Wimm-Bill-Dann’s American Depositary Receipts finished at USD 23.61 on the New York Stock Exchange on the day of PepsiCo’s announcement. The company was valued at USD 4.3 billion. Thus, PepsiCo’s offered to buy Wimm-Bill-Dann at a 38-percent premium over the closing price and a 32-percent premium over the mean price for the last 30 days.    

The joint statement of the two companies confirmed that Pepsi would pay Wimm-Bill-Dann USD 33 per one American Depositary Receipt and USD 132 per share.

Under the terms of the transaction, Pepsi is initially going to acquire 66-percent of Wimm-Bill-Dann from the largest eight shareholders of the company and two of Wimm-Bill-Dann’s subsidiaries. At the next stage, the company will offer to buy out all other shareholders. Pepsi is offering to pay roughly USD 3.8 billion for 66 percent of the company. The American company is valuing Wimm-Bill-Dann at USD 5.8 billion. 

The transaction will promote PepsiCo to the position of the largest food and beverage company on the Russian market. The takeover will allow the American company to become the absolute leader in the country’s fast-growing dairy sector and to create a strong presence in Eastern European and Central Asian markets. The acquisition is also going to augment PepsiCo’s global revenues from the sale of nutritious and functional foods from USD 10 billion to almost USD 13 billion. PepsiCo’s strategic and very ambitious goal is to create a USD 30-billion nutrition food business by the year 2020. 

Indra Nooyi, the chairman and chief executive officer of PepsiCo, said that including Wimm-Bill-Dann in the company’s portfolio presents strong financial advantages and makes for an opportunity to create a high-growth platform for the dairy segment of the beverages market. Ms. Nooyi further explained that Pepsi views the dairy products category as having 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.”

According to Zein Abdalla, the CEO of PepsiCo Europe, Wimm-Bill-Dann is a good business offering significant prospects for growth. The Russian company has a large portfolio of market-leading juice and dairy lines of products that appeal to a large class of consumers within Russia and beyond. Experts believe that the synergy between Wimm-Bill-Dann and Pepsi will have the potential for creating new system capabilities to reach the broader markets in Eastern Europe and Central Asia.  

The management of Wimm-Bill-Dann hailed the agreement as historic for both the company and Russia as a whole. Wimm-Bill-Dann was created 18 years ago with very few employees, who were conducting their operation in a single room. Presently, the company employs 16 000 people and has 38 production facilities. Wimm-Bill-Dann produces juices, dairy products, baby formula, and a host of other products that have received recognition for their quality in Russia.

Pepsi’s move to acquire Wimm-Bill-Dann is considered to be a vote of confidence for the Russian market.  

Pepsi forecasts that its union with Wimm-Bill-Dann can yield pre-tax annual run-rate synergies of as much as USD 100 million within the next 4 years.

The American-based beverage producer expects to fund the purchase transaction through a combination of cash and short-term debt financing, so as to maintain the flexibility of its balance sheets.  Once finalized, the transaction will boost PepsiCo’s top-line and bottom-line growth rates, notwithstanding the origination costs and fees associated with the acquisition.

The deal will unite PepsiCo’s food and beverage brands, including Pepsi-Cola, Lipton, and Lay’s, PepsiCo Russia’s brands Fruktovi Sad, Ya, Tonus, Hrusteam, and Aqua Minerale, with Wimm-Bill-Dann’s dairy and juice brands of Domik v Derevne, Chudo, Imunele, J7, Lubimy Sad, 100% Gold Premium, and Agusha.

After the deal between the companies goes through, PepsiCo’s brands will take the first place on the food and beverage market in Russia, with annual revenue of around USD 5 billion. The American company will control 6 of the 20 most popular food and beverage brands in Russia, as well as 3 of the top 20 overall brands.

The size of Pepsi’s operations in Russia would be twice that of its second-in-line competitor. The company would also come to have unparalleled distribution facilities, including 200 000 coolers. PepsiCo employee base in Russia, Ukraine, and Central Asia will grow to 31 thousand. The company would have 49 manufacturing facilities that would allow it to become the strongest driving force in the food and beverage sector in the region, contributing to marketplace expansion. The team of agricultural workers that PepsiCo will now come to have is considered to be among the best in Russia. The specialists work in association with private farmers and the best Russian scientific agricultural research centers to enhance farming methods for dairy, fruits, grains, and vegetables.