Pepsi buys bottlers for $7.8 million

PepsiCo, the worldÔÇÖs second-largest drinks maker, has said it is buying its two top bottling firms for $7.8 billion.  The deal with PepsiAmericas and Pepsi Bottling Co will enable PepsiCo, whose brands include Tropicana, Gatorade and Mountain Dew, to cut costs and boost its North American profits as sales of carbonated drinks continue to decline. PepsiCo has said that annual savings from the deal, which is expected to close later this year, are expected to reach $300 million by 2012. It will also give the firm greater control over distribution, merchandising and speed to market. PepsiCo chairman and chief executive officer Indra Nooyi said in a statement: ÔÇ£The fully integrated beverage business will enable us to bring innovative products and packages to market faster, streamline our manufacturing and distribution systems and react more quickly to changes in the marketplace, much like we do with our food business.ÔÇØ PepsiAmericas chairman and chief executive officer Robert C. Pohlad said: ÔÇ£This agreement provides great value to our shareholders and an opportunity for them to participate in the unique potential of this combination. Bringing together these three great companies is bold and strategically innovative, and will create a system unmatched in our industry.ÔÇØ  PepsiCoÔÇÖs earlier bids for the two companies, including a $6 billion offer in April, were rejected. PepsiCo already owns 43 percent of PepsiAmericas and 33 percent of Pepsi Bottling Co. Together, the two companies control 80 percent of PepsiCoÔÇÖs US distribution. PepsiCo spun off the bottlers in 1999 following a similar move from rival Coca-Cola. However, PepsiCo has found that this business model does not effectively support independent bottlers and manufacturers, or provide long-term profit growth.  According to industry insiders, Coca-Cola is seeking to strike a similar deal with its own bottling firms. * ┬á┬á┬á┬á┬á┬á*┬á┬á┬á┬á┬á┬á *