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PepsiCo to buy South Africa's Pioneer Food for $1.7 bln
* PepsiCo offers 110 rand per share
* Pioneer Food shares surge
* Investment a boost for struggling South African economy
(Adds background, Pioneer CEO comment,)
By Tanisha Heiberg
JOHANNESBURG, July 19 (Reuters) - PepsiCo has struck
a deal to buy South Africa's Pioneer Food Group for
$1.7 billion, the companies said on Friday, lifting Pioneer's
shares and boosting a sector that has been hit by drought and
tough trading conditions.
The U.S. drinks and snack group said on Friday that
Pioneer's product portfolio was complementary to its own and
would help PepsiCo to expand in sub-Saharan Africa by adding
manufacturing and distribution capabilities.
"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
PepsiCo has offered 110 rand ($7.94) per Pioneer ordinary
share in what would be its second largest deal since 2010, the
companies said, with the news lifting the South African
company's shares by 29.32% to more than 100 rand.
Shares in agribusiness investment company Zeder Investments
, which holds Pioneer as part of its portfolio, also
rose more than 22%.
"It's a vote of confidence in South Africa at a time when we
really need it," Pioneer CEO Tertius Carstens told Reuters.
Food producers have struggled amid a slump in retail sales
as consumers cut back and dry weather hit maize and other
Pioneer, which uses maize in many of its products, reported
a decline in half-year earnings in May, weighed down by
shortages in the staple food.
"It's almost a signal to other overseas companies that we
are open for business. If PepsiCo is willing to put money down
it may lift sentiment of other foreign investors that might come
looking at South Africa for bargains," said Greg Davies,
equities trader at Cratos Capital.
Pioneer, whose brands include Weet-Bix cereal, Liqui Fruit
juice and Sasko bread, is the latest consumer goods firm to be
the target of a buyout after South Africa's Clover Industries
, which processes products including yoghurt, beverages,
and olive oil, began takeover talks with a consortium of
companies called Milco SA last year.
Pioneer was in talks over a potential deal with "a
multinational organisation" in 2017, but that fell apart after
South Africa's credit rating was cut to junk status.
Pioneer and PepsiCo declined to comment whether those talks
referred to them.
Pioneer exports to more than 80 countries. Its deal with
PepsiCo is conditional on regulatory approvals.
($1 = 13.8613 rand)
(Reporting by Tanisha Heiberg; Editing by David Goodman and
First Published: 2019-07-19 09:54:53
Updated 2019-07-19 12:30:25
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