Sodastream held talks with buyer before PepsiCo

SodaStream Negev plant Photo: Eyal Yizhar

The financial concern dropped the idea after realizing that it could not offer a premium that the company would accept.

Beverages and food giant Pepsico was not the first concern to express interest this year in the acquisition of Sodastream International Ltd. (Nasdaq: SODA;TASE: SODA), according to the summons to a shareholders' meeting published by Sodastream yesterday.

Three weeks ago, Pepsico announced that it was acquiring Sodastream, an Israeli manufacturer of home systems for making carbonated drinks, for $3.2 billion. The acquisition of Sodastream requires approval from the company's shareholders, who will meet to approve the deal on October 9 in the offices of Sodastream in Airport City.

According to the summons, a financial concern contacted Sodastream early this year and held initial talks with the company towards its acquisition. Following the talks, which were joined by Sodastream's financial advisors and lawyers, the financial concern dropped the idea after realizing that it could not offer a premium that the company would accept.

The idea of an acquisition by Pepsico was proposed in June. According to the summons, however, talks about a potential deal previously took place between the companies. The two companies signed a strategic cooperation agreement a number of years ago, and they held talks about a commercial agreement in mid-2015 that would include acquisition by Pepsico of a minority holding in Sodastream. These discussions failed to yield an agreement.

Pepsico reentered the picture in June. Sodastream CEO Daniel Birnbaum got a message from a former Pepsico senior executive, who did not speak about a deal at that time. In July, the executive asked Birnbaum whether he would agree to meet with then-Pepsico CEO Indra Nooyi to discuss matters pertaining to the industry and opportunities for the two companies. Birnbaum met with Nooyi and Pepsico president and incoming CEO Ramon Laguarta in mid-July in London.

Nooyi and Laguarta proposed either a strategic cooperation agreement or a strategic investment in Sodastream by Pepsico, but Birnbaum rejected the idea, explaining that it would detract from Sodastream's chances of making other strategic deals in the future. Nooyi and Laguarta thereupon proposed the acquisition of Sodastream.

A price of $118 per Sodastream share, a 34% premium on the market price at the time, was later proposed. Sodastream, however, was aiming higher - at least $140 a share. Negotiations continued, and Pepsico made a non-binding offer of $140 a share in late July.

Meetings were held in Israel in early August and Pepsico conducted due diligence. This was after Sodastream had already published its second quarter results and its share price zoomed 26% to $110. On August 18, Pepsico raised its offer to $144 a share, and the deal was eventually settled at this price and published on August 20.

The summons for the shareholders' meeting reveals that Sodastream will have to pay Pepsico $119 million if the deal between them is called off, a penalty amounting to 3.7% of the value of the deal.

Published by Globes [online], Israel business news - - on September 13, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

SodaStream Negev plant Photo: Eyal Yizhar
SodaStream Negev plant Photo: Eyal Yizhar
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