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Pepsi develops its thirst for Russian assets

Highlights growing importance of food sector; Part of growing M&A trend

US food and drink company PepsiCo has highlighted the strategic importance of the Russian market for big global companies with its plans to acquire a controlling stake in juice and dairy firm Wimm-Bill-Dann that will transform its position in the fast-growing beverages sector. Following the purchase, the Russian juice market will effectively be divided between Pepsi and its arch-rival, Coca-Cola.

In early December Pepsi announced a bid worth $3.8 billion for a 66% stake in Wimm-Bill-Dann, with an option to acquire the rest at a later date. The offer price for the majority stake valued the total company at $5.7 billion and was a 32% premium to outstandings when news of the planned acquisition was announced. Wimm-Bill-Dann stock surged on the news of the takeover bid, with the company’s Moscow-listed shares jumping 58% on the back of heavy trading volumes.

The transaction will establish PepsiCo as the largest food and beverage business in Russia and build on its presence in key markets in eastern Europe and central Asia. It also will raise PepsiCo’s annual global revenues from nutritious and functional foods from roughly $10 billion to $13 billion as part of its goal to build a $30 billion nutrition business by 2020.

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