Pohlads sell Pepsi bottling business

A piece of the Pohlad empire was sold off Tuesday in a $7.8 billion deal that will see PepsiCo Inc. acquire its two largest bottlers, including PepsiAmericas, the Minneapolis company run by the Pohlads for nearly a decade.

The deal, still subject to regulatory approval, would grant the $43 billion PepsiCo more control over its products while making it easier to introduce new drinks, said an industry observer.

"It's a huge plus for PepsiCo," said John Sicher, editor and publisher of Beverage Digest. "They get tremendous control over the route to market for their brands. They'll now have much better ability to decide where, how and at what price their brands are sold."

PepsiAmericas and bottling company Pepsi Bottling Group of Somers, N.Y., rejected a $6 billion bid from PepsiCo, Inc. in April, which analysts at the time said was too low an offer. The sweetened deal disclosed Tuesday offers $28.50 per share for PepsiAmericas and $36.50 per share of Pepsi Bottling Group. PepsiCo already owns at least a third of Pepsi Bottling Group and 43 percent of PepsiAmericas. PepsiAmericas CEO Robert Pohlad stands to earn $18.2 million for his 637,930 shares. The Pohlad family, which owns 9.7 percent of PepsiAmericas through Starquest Securities, stands to make $345.3 million.

The deal will see PepsiCo buy back the bottlers it spun off a decade ago. The deal made sense at the time, but consumer preferences for soda have changed dramatically in recent years, and it now makes more sense for PepsiCo to own its own bottling plants, said Sicher.

"What PepsiCo believes is that the industry has changed so much over the last decade that owning the distribution makes more sense for them rather than having a franchise or franchisee relationship with these bottlers," he said.

The deal also brings the potential for $300 million in savings, most of it through cost cutting and the elimination of overlaps within the corporate levels when PepsiCo merges the three publicly traded companies, according to PepsiCo CEO Indra Nooyi, who deflected an analyst's question Tuesday about management changes, saying it's too early to comment.

Sicher predicted that most of the 20,000 PepsiAmericas employees who produce, sell and distribute beverages will keep their jobs. The company today is the nation's second largest bottler of Pepsi products, with $4.9 billion in sales worldwide and some 15 to 20 executive staff at its Minneapolis headquarters in the RBC Plaza on Nicollet Mall. PepsiAmericas runs 33 manufacturing facilities and 175 distribution centers worldwide.

The deal brings an end to a long run in bottling for the Pohlads. Family patriarch Carl Pohlad, who died Jan. 5, first ventured into soda bottling with a 1962 investment in the Minneapolis/St. Paul Pepsi bottling plant, according to a family biography. He built the business through acquisitions of several bottling plants around the country, adding a wine distribution business, restaurants and snack manufacturers before selling most of its assets to PepsiCo Inc., in 1986 for more than $600 million.

Pohlad then bought more bottling businesses and eventually created the publicly traded PepsiAmericas, run by his son Robert since its creation in 2000.

Robert Pohlad, preparing for a town hall-style meeting scheduled for Thursday at PepsiAmericas' Schaumberg, Ill., offices, was unavailable for comment Tuesday. In a conference call with analysts Tuesday, he said "the timing was right" for the deal.

PepsiCo owns Gatorade, Frito-Lay potato chips, Quaker and Tropicana brands along with its trademark Pepsi products.

It's unclear what the Pohlads will do with the money from the deal, but they've got a number of projects under way. The Pohlad Group, which owns the Minnesota Twins, recently bought Sears BMW in Minnetonka and Coon Rapids Chrysler Jeep, along with two Inver Grove Heights dealerships from Denny Hecker, with plans to buy more. Pohlad Companies, meanwhile, has developed retail centers, office buildings, industrial parks and housing cooperatives through its United Properties business while pursuing the creation of a network of investment sales offices through its NorthMarq business.