Cans of Pepsi are displayed in Paris, France. Picture: REUTERS/JACKY NAEGELEN
Cans of Pepsi are displayed in Paris, France. Picture: REUTERS/JACKY NAEGELEN

The proposed $1.7bn (about R24bn) acquisition of Pioneer Foods, owner of brands such as Sasko bread and Ceres juices, by New York-based food and beverages giant PepsiCo will be its second largest since 2010 and its biggest in Sub-Saharan Africa.

“This is a very exciting day for both companies and represents a significant step in expanding our footprint in Sub-Saharan Africa,” Eugene Willemsen, CEO of PepsiCo Sub-Saharan Africa told Business Day on Friday shortly after the release of details of the R110 a share offer.

Willemsen said the Pioneer acquisition represents a unique opportunity for PepsiCo, which sees Africa as a key growth area. “Pioneer’s portfolio of products complements our brands,” said Willemsen.

Ahead of the deal PepsiCo’s main exposure in SA is through brands such as Simba, Pepsi, 7UP, NikNaks, Lays and Doritos. Until two years ago, Pioneer was Pepsi’s SA bottler.

Pioneer CEO Tertius Carstens welcomed the transaction, which he said is not only a vote of confidence in Pioneer but also in SA. “In this deal, Pioneer gets access to leading global capabilities and also to an impressive geographic footprint.”

The R110 a share offer, which has already got the backing of 53% of Pioneer shareholders, represents a 56.5% premium on the share’s average trading price over the past 30 days.

Independent analyst Anthony Clark described the offer as “generous” in terms of Pioneer’s recent trading history, but said PepsiCo is buying at a weak point in Pioneer’s cycle. Stellenbosch investment company Zeder, which is the single largest shareholder with a 28.23% stake, is among the shareholders backing the deal. Zeder paid R99 a share for its stake in 2014. “Not a great return, but who cares they now have lots of cash coming in,” said Clark. But Pioneer will  benefit from having a “rich parent” that can “take it to the next level”, Clark said.

The offer price is almost half the highs of R210 a share reached in 2015. For the past two years the share has been on a steady decline.

Both Pioneer and Zeder’s shares rallied on Thursday, ahead of the announcement, with Pioneer’s stock closing 6.3% up at R77.60.

Zeder confirmed in an announcement that it will pay down debt and pay a special dividend. It will also “invest in new opportunities or re-invest in Zeder’s existing underlying portfolio”.

Zeder said it supports the PepsiCo deal as it does not want to “stand in the way of Pioneer Foods and its growth objectives”. The deal is also fair, it said.

With an hour to go before the JSE closes, Pioneer’s shares had surged 30.2% to R101.03, while Zeder had risen 29.2% to R5.13. This puts Pioneer and Zeder on track for their biggest one-day gains since listing in 2008 and 2006, respectively.