PepsiCo and Quaker Oats will file a proxy statement/prospectus and other
relevant documents concerning the proposed merger transaction with the SEC.
INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES
AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. You will be able to obtain the documents free of
charge at the website maintained by the SEC at www.sec.gov. In addition, you may
obtain documents filed with the SEC by PepsiCo free of charge by requesting them
in writing from PepsiCo, Inc., 700 Anderson Hill Road, Purchase, New York 10577,
Attention: Secretary, or by telephone at (914) 253-2000. You may obtain
documents filed with the SEC by Quaker Oats free of charge by requesting them in
writing from The Quaker Oats Company, 321 North Clark Street, Chicago, Illinois
60610, Attention: Corporate Secretary, or by telephone at (312) 222-7111.
PepsiCo and Quaker Oats, and their respective directors and executive officers,
may be deemed to be participants in the solicitation of proxies from the
stockholders of PepsiCo and Quaker Oats in connection with the merger.
Information about the directors and executive officers of PepsiCo and their
ownership of PepsiCo shares is set forth in the proxy statement for PepsiCo's
2000 annual meeting of shareholders. Information about the directors and
executive officers of Quaker Oats and their ownership of Quaker Oats stock is
set forth in the proxy statement for Quaker's 2000 annual meeting of
stockholders. Investors may obtain additional information regarding the
interests of such participants by reading the proxy statement/prospectus when
its becomes available.
<PAGE>
PEPSI LOGO FRITO LAY LOGO LOGO
News from PepsiCo, Inc.
Purchase, New York Telephone: 914-253-2725 www.pepsico.com
Contact: Richard M. Detwiler, Jr.
Vice President, Public Relations
or
Mark Dollins at Quaker Oats Company
312-222-7399
PEPSICO TO ACQUIRE THE QUAKER OATS COMPANY
Acquisition Creates Big Growth Opportunities and
Synergies Across Snack and Beverage Portfolio;
Combination Also To Accelerate Leadership Changes
PURCHASE, NY and CHICAGO, IL, Dec. 4 -- PepsiCo, Inc. and The Quaker
Oats Company said today they have reached an agreement for PepsiCo to
acquire Quaker in a tax-free transaction which features PepsiCo
exchanging 2.3 shares of its stock for each share of Quaker, up to a
maximum value of $105 for each Quaker share. There is no guaranteed
price protection or "collar." However, if the value to Quaker
shareholders falls below $92 per share, there is a provision for
Quaker to exit the deal without penalty.
The addition of Quaker is expected to be accretive to PepsiCo's
earnings per share in the first full year and thereafter. The
acquisition will immediately improve PepsiCo's return on invested
capital by 200 basis points. The addition of Quaker will also enhance
PepsiCo's ongoing sales and profit growth rates. The transaction will
be accounted for as a pooling of interests and is expected to close in
the first half of next year, subject to approval by PepsiCo and Quaker
shareholders and expiration of the Hart-Scott-Rodino Antitrust waiting
period and other customary approvals. PepsiCo also said the stock
transaction would require the issuance of approximately 315 million
new shares to Quaker shareholders.
"This will be a truly outstanding combination," said Roger A. Enrico,
PepsiCo Chairman and Chief Executive Officer. "Bringing together
Quaker and PepsiCo creates a wealth of exciting growth opportunities
as well as important cost and selling synergies. It is also very
consistent with our sharp focus on convenient food and beverages."
Quaker Chairman Robert S. Morrison said, "Over the last three years,
The Quaker Oats Company has outpaced the growth of the U.S. food and
beverage industry. It's a testament to our strong brands, talented
people and operating effectiveness. Combining with the world-renowned
PepsiCo organization will unleash the tremendous global growth
potential of the Gatorade brand and leverage the strengths of our
foods business."
- more -
<PAGE>
Roger Enrico also announced today that the PepsiCo board has accepted
his recommendation to make several management changes when the
transaction closes.
"As this deal got closer to becoming a reality, our focus shifted to
implementation and that's all about leadership, which is another great
asset that PepsiCo and Quaker share," Enrico said. "Bob Morrison and
the entire Quaker management team have done an outstanding job and we
are looking forward to welcoming them to PepsiCo."
"Thinking about Bob's role led me to reconsider my role and that of
Steve Reinemund, our President and Chief Operating Officer, who we'd
already decided would succeed me as CEO and Chairman," Enrico
continued. "It became clear that Bob and I should share the same
priorities -- working closely with Steve to ensure that PepsiCo stays
on the steady course we've engineered over the last four years, and
that the Quaker integration is quickly accretive from the top line to
the bottom line and from a cash flow and people standpoint."
"That led me to recommend several important moves to the Board, which
they intend to make when the deal is completed. Bob Morrison and I
will become Vice Chairmen, and Steve Reinemund will become Chairman
and CEO. In addition, PepsiCo's Chief Financial Officer, Indra Nooyi,
will become President at that time, while retaining her Chief
Financial Officer responsibilities."
"My commitment to PepsiCo is exactly the same and my timing has not
changed," said Enrico. "Steve and I will continue working together
closely as we have been this past year, sharing responsibilities for
leading and running the company. Bob will join us in that partnership
and we both look forward to working with him." Morrison, who will be
nominated for election to the Board, will continue to serve as
Chairman, President and CEO of Quaker when it becomes part of PepsiCo.
Quaker will continue to be operated out of Chicago with Morrison's
current leadership team.
In her new role as President and CFO, Nooyi will also be nominated for
election to the Board. She will be responsible for corporate staff
functions, including legal, human resources and corporate
communications, in addition to her current CFO duties overseeing
finance, strategic planning, mergers and acquisitions, information
technology, advanced technologies and procurement. "Indra's
contributions to PepsiCo have been enormous and she will make a great
President," said Enrico. "She is a terrific addition to our
world-class board and her perspective will be invaluable."
The acquisition of Quaker provides PepsiCo with several key strategic
and economic benefits:
o Quaker's powerful Gatorade brand, the world's number one
sports drink, will make PepsiCo the clear leader in
non-carbonated beverages, the fastest growing sector of the
beverage industry. Additionally, leveraging the much larger
scale of Gatorade's vast warehouse distribution system will
enable PepsiCo's Tropicana juice unit to gain the scale it needs
to make its ambient juice brands stronger and more profitable.
- more -
<PAGE>
o Quaker's rapidly expanding snack business -- including
granola bars, rice snacks and fruit and oatmeal bars -- is
highly complementary to PepsiCo's Frito-Lay unit, the world
leader in salty snacks. The Quaker brand will extend PepsiCo's
reach into morning on-the-go meal occasions, snacks aimed at
kids and grain-based snacks. Distributing Quaker's snacks
through Frito-Lay's vast distribution system will create very
substantial growth opportunities both in the U.S. and
internationally.
o Quaker's highly profitable non-snack food business (with
leading brands like Quaker Oatmeal, Life and Cap'n Crunch
cereals, Rice a Roni and Aunt Jemima syrup) generates hundreds of
millions of dollars in cash, and through increased innovation and
efficiencies can continue to provide steady profit growth and
substantial free cash flow.
Combining PepsiCo and Quaker will create a company with an
exceptionally strong position in the rapidly growing market for
convenient foods and beverages. The combined company, which will
retain the PepsiCo name, will have pro forma revenues of $25 billion.
Its expected market capitalization of more than $80 billion will place
it among the world's five largest consumer products companies.
Merrill Lynch served as advisor to PepsiCo, Inc. and Goldman Sachs
served as lead advisor to Quaker Oats. JP Morgan also served as an
advisor to Quaker Oats.
PepsiCo will hold a presentation for investors regarding the
transaction that will be available via webcast and telephone at 9:00
a.m. (Eastern Standard Time) today. Investors interested in accessing
the webcast may do so through PepsiCo's website (www.PepsiCo.com) or
directly at www.vcall.com/NASApp/VCall/EventPage?ID=57020. Investors
interested in listening to the presentation by telephone should call
1-800-946-0719, the reservation number required for the call is
496950. The presentation will be repeated for those interested in
listening later.
Safe Harbor Statement
This release contains certain "forward-looking" statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectation and are
naturally subject to uncertainty and changes in circumstances. Actual
results may vary materially from the expectations contained herein.
The forward-looking statements contained herein include statements
about future financial operating results and benefits of the pending
merger between PepsiCo, Inc. and The Quaker Oats Company. Factors that
could cause actual results to differ materially from those described
herein include: the inability to obtain shareholder or regulatory
approvals; actions of the U.S., foreign and local governments; the
inability to successfully integrate the businesses of PepsiCo, Inc.
and The Quaker Oats Company; costs related to the merger; the
inability to achieve cost-cutting synergies resulting from the merger;
changing consumer or marketplace trends; and the general economic
environment. Neither PepsiCo, Inc. nor The Quaker Oats Company is
under any obligation to (and expressly disclaims any such obligation
to) update or alter its forward-looking statements, whether as a
result of new information, future events, or otherwise.
We urge investors to read the Proxy Statement/Prospectus and any other
relevant documents that PepsiCo, Inc. and The Quaker Oats Company have
filed and will file with the Securities and Exchange Commission
because they contain important information.
# # # #
<PAGE>
PEPSICO CUSTOMER LETTER
[Roger Letterhead]
December 4, 2000
Dear (Personalized from "Top to Top" List?)
I have some great news to share: This morning PepsiCo announced plans to acquire
Quaker Oats, creating a powerhouse in the packaged goods industry and an even
tighter connection with your business. As described in the attached press
release, this is a milestone agreement - one that will dramatically enhance our
ability to meet your needs in the fast-growing segment of convenient foods and
beverages.
Today marks a new and exciting chapter in PepsiCo's history. With Quaker
complementing Pepsi, Frito-Lay, Tropicana and, most recently, SoBe, we'll be
calling on you with an unmatched portfolio of powerful and innovative products.
I'm tremendously excited about what these great brands can do together - and
what they will mean to you and your customers.
I'm no less enthusiastic about our new management team. With the completion of
this merger, Steve Reinemund will become PepsiCo's Chairman and CEO, a move we
announced earlier this fall. Steve is an executive of the highest integrity,
character and vision. He's also the right person to take this company - and our
partnership with you - to new heights.
But he won't be alone. I'm delighted to let you know that Quaker Chairman and
CEO Robert Morrison will join our leadership team as Vice Chairman, while
continuing to run Quaker. Steve also will count on the continued insight and
leadership of Indra Nooyi, who will be named President and Chief Financial
Officer. I'll be working closely with Steve, Bob and Indra over the next year or
two, offering advice and doing my part to ensure a smooth transition.
I hope you share my enthusiasm for the new PepsiCo and look forward to working
with you in the days to come.
As always, thank you very much for your business and for your support.
<PAGE>
December 4, 2000
TO: All PCNA Bottlers
RE: Quaker Oats Acquisition
I'm sure you've already heard: PepsiCo has made the much-anticipated move to
acquire Quaker Oats. As you'll see in the attached news release and letter from
Roger Enrico, this is an epic agreement, with tremendous upside potential.
Together, PepsiCo and Quaker are unveiling an unmatched portfolio of powerhouse
brands, a winning leadership team and a bold strategic vision to be the player
in convenient foods and beverages.
On the beverage side, Quaker's forceful Gatorade brand will push PepsiCo well
ahead in the fast-growing non-carbonated field. Beyond our core CSD business,
Gatorade caps an already winning beverage lineup, including Tropicana, Aquafina,
FruitWorks, Lipton, Frappuccino and SoBe - all leaders in their respective
categories.
Gatorade is the world's number-one sports drink - by far. Yet, as with
everything we do, there are compelling opportunities for PepsiCo and its
divisions to develop this great brand even further. There are no plans to change
Quaker's current warehouse distribution system, but we may explore
channel-specific opportunities for our bottling system.
As you'll read and see in the media, it will probably be several months before
this transaction is completed. We will let you know about any further
development as the dust settles on this momentous agreement.
Sincerely,
/s/ Gary
<PAGE>
From: Enrico, Roger (Broadcast)
Sent: Monday, December 04, 2000 9:11 AM
Subject: Announcement
December 4, 2000
Dear Colleagues:
I'm delighted to tell you that this morning we made a very exciting and historic
announcement. PepsiCo has reached an agreement to acquire the Quaker Oats
Company in a transaction valued at $14 billion.
If you've read the newspapers lately, most of what's been written about Quaker
has focused on the company's extraordinarily successful Gatorade brand. Gatorade
is a wonderful brand. But it's just the beginning of why Quaker was so
attractive to PepsiCo. The real news is that buying Quaker has very positive
implications for all of our businesses.
As you'll see in the news release that follows, the deal will help drive growth
and efficiencies at Frito-Lay, at Pepsi-Cola and at Tropicana. In short, it
creates a whole range of exciting opportunities for our businesses and for all
of us -- and being part of PepsiCo will give a big boost to Quaker and our new
colleagues.
You'll also see in our announcement that the completion of the acquisition next
year will trigger several important changes in our management team:
* Steve Reinemund will become Chairman and Chief Executive Officer.
* Indra Nooyi will become President, in addition to being Chief Financial
Officer, and will be nominated for election to our board of directors.
* Quaker Chairman, President and CEO Bob Morrison will join PepsiCo as a
Vice Chairman as well as Chairman and CEO of the Quaker portion of PepsiCo. He
too will be nominated for election to the board of directors.
* I'll also become a Vice Chairman, helping to ensure a smooth
consolidation of these two great companies. In light of the Quaker development
I felt it best that Steve become Chairman a little sooner than we originally
planned.
As I look at PepsiCo today I see a company in great shape, better than we've
been in many years. And when we join with Quaker, our prospects for healthy,
consistent growth will be even brighter.
Please join me in welcoming to the PepsiCo family our 12,000 new colleagues at
Quaker.
Regards,
Roger
PEPSICO TO ACQUIRE THE QUAKER OATS COMPANY
Acquisition Creates Big Growth Opportunities and
Synergies Across Snack and Beverage Portfolio;
Combination Also To Accelerate Leadership Changes
PURCHASE, NY and CHICAGO, IL, Dec. 4 -- PepsiCo, Inc. and The Quaker Oats
Company said today they have reached an agreement for PepsiCo to acquire Quaker
in a tax-free transaction which features PepsiCo exchanging 2.3 shares of its
stock for each share of Quaker, up to a maximum value of $105 for each Quaker
share. There is no guaranteed price protection or "collar." However, if the
value to Quaker shareholders falls below $92 per share, there is a provision for
Quaker to exit the deal without penalty.
The addition of Quaker is expected to be accretive to PepsiCo's earnings per
share in the first full year and thereafter. The acquisition will immediately
improve PepsiCo's return on invested capital by 200 basis points. The addition
of Quaker will also enhance PepsiCo's ongoing sales and profit growth rates. The
transaction will be accounted for as a pooling of interests and is expected to
close in the first half of next year, subject to approval by PepsiCo and Quaker
shareholders and expiration of the Hart-Scott-Rodino Antitrust waiting period
and other customary approvals. PepsiCo also said the stock transaction would
require the issuance of approximately 315 million new shares to Quaker
shareholders.
"This will be a truly outstanding combination," said Roger A. Enrico, PepsiCo
Chairman and Chief Executive Officer. "Bringing together Quaker and PepsiCo
creates a wealth of exciting growth opportunities as well as important cost and
selling synergies. It is also very consistent with our sharp focus on convenient
food and beverages."
Quaker Chairman Robert S. Morrison said, "Over the last three years, The Quaker
Oats Company has outpaced the growth of the U.S. food and beverage industry.
It's a testament to our strong brands, talented people and operating
effectiveness. Combining with the world-renowned PepsiCo organization will
unleash the tremendous global growth potential of the Gatorade brand and
leverage the strengths of our foods business."
- more -
Roger Enrico also announced today that the PepsiCo board has accepted his
recommendation to make several management changes when the transaction closes.
"As this deal got closer to becoming a reality, our focus shifted to
implementation and that's all about leadership, which is another great asset
that PepsiCo and Quaker share," Enrico said. "Bob Morrison and the entire Quaker
management team have done an outstanding job and we are looking forward to
welcoming them to PepsiCo."
"Thinking about Bob's role led me to reconsider my role and that of Steve
Reinemund, our President and Chief Operating Officer, who we'd already decided
would succeed me as CEO and Chairman," Enrico continued. "It became clear that
Bob and I should share the same priorities -- working closely with Steve to
ensure that PepsiCo stays on the steady course we've engineered over the last
four years, and that the Quaker integration is quickly accretive from the top
line to the bottom line and from a cash flow and people standpoint."
"That led me to recommend several important moves to the Board, which they
intend to make when the deal is completed. Bob Morrison and I will become Vice
Chairmen, and Steve Reinemund will become Chairman and CEO. In addition,
PepsiCo's Chief Financial Officer, Indra Nooyi, will become President at that
time, while retaining her Chief Financial Officer responsibilities."
"My commitment to PepsiCo is exactly the same and my timing has not changed,"
said Enrico. "Steve and I will continue working together closely as we have been
this past year, sharing responsibilities for leading and running the company.
Bob will join us in that partnership and we both look forward to working with
him." Morrison, who will be nominated for election to the Board, will continue
to serve as Chairman, President and CEO of Quaker when it becomes part of
PepsiCo. Quaker will continue to be operated out of Chicago with Morrison's
current leadership team.
In her new role as President and CFO, Nooyi will also be nominated for election
to the Board. She will be responsible for corporate staff functions, including
legal, human resources and corporate communications, in addition to her current
CFO duties overseeing finance, strategic planning, mergers and acquisitions,
information technology, advanced technologies and procurement. "Indra's
contributions to PepsiCo have been enormous and she will make a great
President," said Enrico. "She is a terrific addition to our world-class board
and her perspective will be invaluable."
The acquisition of Quaker provides PepsiCo with several key strategic and
economic benefits:
* Quaker's powerful Gatorade brand, the world's number one sports drink,
will make PepsiCo the clear leader in non-carbonated beverages, the fastest
growing sector of the beverage industry. Additionally, leveraging the much
larger scale of Gatorade's vast warehouse distribution system will enable
PepsiCo's Tropicana juice unit to gain the scale it needs to make its ambient
juice brands stronger and more profitable.
- more -
* Quaker's rapidly expanding snack business -- including granola bars,
rice snacks and fruit and oatmeal bars -- is highly complementary to PepsiCo's
Frito-Lay unit, the world leader in salty snacks. The Quaker brand will extend
PepsiCo's reach into morning on-the-go meal occasions, snacks aimed at kids and
grain-based snacks. Distributing Quaker's snacks through Frito-Lay's vast
distribution system will create very substantial growth opportunities both in
the U.S. and internationally.
* Quaker's highly profitable non-snack food business (with leading brands
like Quaker Oatmeal, Life and Cap'n Crunch cereals, Rice a Roni and Aunt Jemima
syrup) generates hundreds of millions of dollars in cash, and through increased
innovation and efficiencies can continue to provide steady profit growth and
substantial free cash flow.
Combining PepsiCo and Quaker will create a company with an exceptionally strong
position in the rapidly growing market for convenient foods and beverages. The
combined company, which will retain the PepsiCo name, will have pro forma
revenues of $25 billion. Its expected market capitalization of more than $80
billion will place it among the world's five largest consumer products
companies.
Merrill Lynch served as advisor to PepsiCo, Inc. and Goldman Sachs served as
lead advisor to Quaker Oats. JP Morgan also served as an advisor to Quaker Oats.
PepsiCo will hold a presentation for investors regarding the transaction that
will be available via webcast and telephone at 9:00 a.m. (Eastern Standard Time)
today. Investors interested in accessing the webcast may do so through PepsiCo's
website (www.PepsiCo.com) or directly at
www.vcall.com/NASApp/VCall/EventPage?ID=57020. Investors interested in listening
to the presentation by telephone should call 1-800-946-0719, the reservation
number required for the call is 496950. The presentation will be repeated for
those interested in listening later.
Safe Harbor Statement
This release contains certain "forward-looking" statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements are based
on management's current expectation and are naturally subject to uncertainty and
changes in circumstances. Actual results may vary materially from the
expectations contained herein. The forward-looking statements contained herein
include statements about future financial operating results and benefits of the
pending merger between PepsiCo, Inc. and The Quaker Oats Company. Factors that
could cause actual results to differ materially from those described herein
include: the inability to obtain shareholder or regulatory approvals; actions of
the U.S., foreign and local governments; the inability to successfully integrate
the businesses of PepsiCo, Inc. and The Quaker Oats Company; costs related to
the merger; the inability to achieve cost-cutting synergies resulting from the
merger; changing consumer or marketplace trends; and the general economic
environment. Neither PepsiCo, Inc. nor The Quaker Oats Company is under any
obligation to (and expressly disclaims any such obligation to) update or alter
its forward-looking statements, whether as a result of new information, future
events, or otherwise.
We urge investors to read the Proxy Statement/Prospectus and any other relevant
documents that PepsiCo, Inc. and The Quaker Oats Company have filed and will
file with the Securities and Exchange Commission because they contain important
information.
# # # #
<PAGE>
Draft Two
CONFERENCE CALL REMARKS
Bob Morrison
Monday, December 4, 2000
9:00 a.m. (EST)
<PAGE>
Thank you, Roger.
My comments will be brief.
I simply want all of you who are listening--analysts, shareholders, the business
press and our employees--to know that I'm really thrilled with the prospect of
combining Quaker Oats with PepsiCo.
o First of all, this merger is a wonderful thing for our shareholders.
For the three-years through Oct. 31 of this year -just two days before
takeover rumors hit the press -- Quaker shareholders have seen an average
annual total return of nearly 22 percent, a return that far outdistances
the performance of any of our peers over that period.
<PAGE>
At Friday's close, the anticipated Pepsi deal will provide a premium of
nearly 20 percent on top of the October 31 price.
Clearly, this represents an extremely attractive immediate return.
(PAUSE)
But, of even greater importance to those shareholders who take a
longer-term view, there is an opportunity here to participate in one of the
most dramatic growth stories in food and beverage history.
Many of you are sadly aware that, in recent times, mergers, in our industry
or others, often bring together one struggling company with another--or, at
best, one struggling company with one that's performing well.
This merger is unusual, if not unique, in that it is combining two
companies that are both firing on all cylinders--leading their industries
in every respect.
This combination presents the prospects of a truly awesome growth story
and, therefore, impressive future returns for our shareholders, over time.
(PAUSE)
o This merger is also wonderful for our employees.
Quaker employees are winners. This merger will provide them with an
order-of-magnitude increase in the resources available to keep on winning
in the marketplace.
<PAGE>
The merger will also provide them with an opportunity to grow, on a
personal level, in a company long known for identifying and developing a
diverse group of strong leaders.
Our employees will thrive in this environment and will see greater career
growth possibilities than were possible in a stand-alone Quaker Oats
company.
(PAUSE)
I'm genuinely excited to join Roger, Steve and Indra as a part of the PepsiCo
leadership team.
I firmly believe we're going to do great things together.
###
<PAGE>
================================================================================
PEPSICO INC. LOGO QUAKER LOGO
================================================================================
<PAGE>
Safe Harbor Statement
================================================================================
This presentation contains certain "forward-looking" statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations and are naturally
subject to uncertainty and changes in circumstances. Actual results may vary
materially from the expectations contained herein. The forward-looking
statements contained herein include statements about future financial operating
results and benefits of the pending merger between PepsiCo and Quaker Oats.
Factors that could cause actual results to differ materially from those
described herein include: the inability to obtain shareholder or regulatory
approvals; actions of the U.S., foreign and local governments; the inability to
successfully integrate the businesses of PepsiCo and Quaker Oats; costs related
to the merger; the inability to achieve cost-cutting synergies resulting from
the merger; changing consumer or marketplace trends; and the general economic
environment. Neither PepsiCo nor Quaker Oats is under any obligation to (and
expressly disclaims any such obligation to) update or alter its forward-looking
statements, whether as a result of new information, future events, or
otherwise.
We urge investors to read the Proxy Statement/Prospectus and any other relevant
documents that PepsiCo and Quaker Oats have filed and will file with the
Securities and Exchange Commission ("SEC"), because they contain important
information.
================================================================ PEPSICO QUAKER
LOGO LOGO
<PAGE>
Transaction Terms
================================================================================
Transaction Structure: Stock-for-stock merger of PepsiCo and Quaker Oats
Exchange Ratio: 2.3 shares of PepsiCo common stock per Quaker Oats share
with a cap of $105 per Quaker Oats share
Transaction Value: Approximately $14 billion
Pro Forma Ownership: PepsiCo 83%, Quaker Oats 17%
Accounting Treatment: Pooling-of-interests accounting
Tax Treatment: Tax-free reorganization
Board of Directors: Robert Morrison to be nominated for election to
PepsiCo Board of Directors
Deal Protection: $420 million breakup fee
19.9% option over Quaker Oats stock
Walkaway: Quaker Oats walkaway right below $40 subject to
PepsiCo top-up to $92 per Quaker Oats share
Expected Closing Date: First Half of 2001
================================================================PEPSICO QUAKER
LOGO LOGO
<PAGE>
The 'New' PepsiCo: A Premier Consumer Products Company
================================================================================
o Three high growth businesses
TROPICANA PEPSI FRITOLAY
LOGO LOGO LOGO
o Clear financial objectives
o 6-7% top line growth
o 10-11% operating profit growth
o 12-13% EPS growth
o 50-100 basis points of ROIC improvement per annum
o Financially disciplined
o 5 quarters of consistent, solid growth - exceeding expectations
o Stringent strategic criteria and financial screen for acquisitions
================================================================PEPSICO QUAKER
LOGO LOGO
<PAGE>
Long-Term Financial Algorithm
================================================================================
Revenue Growth EBIT Growth EPS Growth ROIC
2000-2005 2000-2005 2000-2005 2000-2005
PepsiCo Standalone 6-7% 10-11% 12-13% 22%
Quaker Standalone 5-6% 8-9% 10-12% 41%
Pro Forma PepsiCo(a) 7%+ 11%+ 13-14% 24%
+600-700 bps
by Yr. 5
(a) Pro Forma PepsiCo/Quaker with synergies
================================================================PEPSICO QUAKER
LOGO LOGO
<PAGE>
Gatorade: Powerhouse Beverage Business
================================================================================
Sales ($B) EBIT ($MM)
---------------------------------------- ------------------------------------
$B $1.5 $1.7 $1.8 $2.1 $MM $187 $233 $263 $286
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
1997 1998 1999 2000E 1997 1998 1999 2000E
------------------------------- ---------------------------
3 yr CAGR: 12% 3 yr CAGR: 15%
------------------------------- ---------------------------
================================================================PEPSICO QUAKER
LOGO LOGO
<PAGE>
Gatorade: Financial Assumptions
================================================================================
2000-05 CAGR
----------------------------
Revenues EBIT
-------- -----
Gatorade base case 9.4% 13.5%
================================================================PEPSICO QUAKER
LOGO LOGO
<PAGE>
PepsiCo's US Beverage Portfolio
================================================================================
Pepsi-Cola Tropicana
Refreshment Beverages Functional Beverages
--------------------------------------- --------------------------------
Carbonated Non-Carbonated Ambient Chilled
Soft Drinks Refreshment Beverages Juice & Juice Drinks Juices
----------- --------------------- -------------------- --------
Pepsi TM Aquafina Seasons Best Tropicana Pure
Diet Pepsi Lipton Iced Tea Premium
Pepsi One Lipton Brisk Tropicana Twister Seasons Best
Mountain Dew Frappuccino Dole
Diet Mountain Dew Fruitworks
Sierra Mist All Sport
Slice Dole
Mug SoBe
------------------------------------------------------------
|
Non Carbonated Beverages
================================================================PEPSICO QUAKER
LOGO LOGO
<PAGE>
US Beverage Market Overview
================================================================================
2000 US Retail $ Sales - $ 81 B 2000 US Volume Shares
CSD 72% Coca-Cola 16%
[GRAPHIC OMITTED] Gatorade 8%
Tropicana 8%
Lipton 3%
Aquafina 2%
Non-CSD 28%
All Others Other Pepsi(a)
60% 3%
PepsiCo 25%
Sales CAGRs
---------------- -----------
1995-2000 2000-2005 proj
-----------------------------------------------
CSDs: 3 % 2 - 3%
Non-CSDs: 7 % 8 - 9%
(a) Includes All Sport, Frappuccino, Fruitworks, SoBe and others
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Gatorade: Financial Modeling 2000 - 05 CAGR
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Revenues EBIT
-------- ------
Base case 9.4% 13.5%
---------
Revenue Synergies
-----------------
Increase US Gatorade penetration thru Not Included (NI) NI
Pepsi Bottling network
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Gatorade: Financial Modeling 2000 - 05 CAGR
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Revenues EBIT
-------- ------
Base case 9.4% 13.5%
---------
Revenue Synergies
-----------------
Increase US Gatorade penetration thru Not Included (NI) NI
Pepsi Bottling network
Increased International Growth for Gatorade NI NI
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Gatorade: Financial Modeling 2000 - 05 CAGR
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Revenues EBIT
-------- ----------
Base case 9.4% 13.5%
---------
Revenue Synergies
-----------------
Increase US Gatorade penetration thru Not Included (NI) NI
Pepsi Bottling network
Increased International Growth for
Gatorade NI NI
Tropicana growth thru Gatorade
distribution $400MM in Yr. 5 $45MM (by Yr. 5)
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Gatorade: Financial Modeling 2000 - 05 CAGR
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Revenues EBIT
-------- ------------
Base case 9.4% 13.5%
---------
Revenue Synergies
-----------------
Increase US Gatorade penetration thru Not Included (NI) NI
Pepsi Bottling network
Increased International Growth for
Gatorade NI NI
Tropicana growth thru Gatorade
distribution $400MM in Yr. 5 $45MM (by Yr. 5)
Cost Synergies
--------------
Procurement Savings - $60MM (by Yr. 5)
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Gatorade: Financial Modeling 2000 - 05 CAGR
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Revenues EBIT
-------- ------------
Base case 9.4% 13.5%
---------
Revenue Synergies
-----------------
Increase US Gatorade penetration thru Not Included (NI) NI
Pepsi Bottling network
Increased International Growth for
Gatorade NI NI
Tropicana growth thru Gatorade
distribution $400MM in Yr. 5 $45MM (by Yr. 5)
Cost Synergies
--------------
Procurement Savings - $60MM (by Yr. 5)
SG&A Consolidation w/Tropicana |
| - $65MM (by Yr. 5)
Hotfill manufacturing & logistics |
management
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Gatorade: Financial Modeling 2000 - 05 CAGR
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Revenues EBIT
-------- ------------
Base case 9.4% 13.5%
---------
Revenue Synergies
-----------------
Increase US Gatorade penetration thru Not Included (NI) NI
Pepsi Bottling network
Increased International Growth for
Gatorade NI NI
Tropicana growth thru Gatorade
distribution $400MM in Yr. 5 $45MM (by Yr. 5)
Cost Synergies
--------------
Procurement Savings - $60MM (by Yr. 5)
SG&A Consolidation w/Tropicana |
| - $65MM (by Yr. 5)
Hot-fill manufacturing & logistics |
management
Building future capabilities
-----------------------------
Innovation from nutrition/physiology
centers NI NI
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Gatorade: Financial Modeling 2000 - 05 CAGR
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Revenues EBIT
-------- ------------
Base case 9.4% 13.5%
---------
Revenue Synergies
-----------------
Increase US Gatorade penetration thru Not Included (NI) NI
Pepsi Bottling network
Increased International Growth for
Gatorade NI NI
Tropicana growth thru Gatorade
distribution $400MM in Yr. 5 $45MM (by Yr. 5)
Cost Synergies
--------------
Procurement Savings - $60MM (by Yr. 5)
SG&A Consolidation w/Tropicana |
| - $65MM (by Yr. 5)
Hot-fill manufacturing & logistics |
management
Building future capabilities
-----------------------------
Innovation from nutrition/physiology
centers NI NI
International network build-out for
hot fill mfg. NI NI
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Snack Foods: Leadership Brands in Growth Categories
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Key Brands Market Position 1 Yr. Mkt. Growth
Granola Bars Quaker Chewy #1 7%
Fruit/Oatmeal Bars Quaker #1 42%
Energy Bars Gatorade - 45%
Rice Cakes Crispy 'Minis', Quaker #1 2%
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Quaker Snacks: Performance TrendsXXXXXXXX
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Sales ($MM) EBIT ($MM)
---------------------------------------- ------------------------------------
$MM $287 $310 $334 $382 $MM $46 $50 $54 $62
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
1997 1998 1999 2000E 1997 1998 1999 2000E
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3 Year CAGR: 10% 3 Year CAGR: 10%
1 Year CAGR: 14% 1 Year CAGR: 14%
------------------------------- ---------------------------
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Quaker Snacks: Financial Projections
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2000 - 05 CAGR*
-----------------------------------
Revenue EBIT*
------- -----
Base Growth Rate 8.0% 10.8%
Additional Revenue upsides $200MM by Yr. 5 $34MM by Yr. 5
thru distribution gains
International Distribution gains Not Included (N.I.) N.I.
*All numbers are approximate
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Snack Bars: Market Overview
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Snack/Granola/Energy/Fruit Bars Snack/Granola/Energy/Fruit Bars
------------------------------- -------------------------------
[GRAPHICS OMITTED]
Granola 45% Private Label 6%
Treat Bars(a) 19% Nestle 6%
Energy 29% General Mills 6%
Fruit/Oatmeal 7% Other 26%
Quaker Oats 16%
McKee 9%
Kraft 8%
Kellogg 24%
$ Retail Sales: 1.8 B
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1999-2000 Growth
----------------
Total Market: 9 %
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(a) Quaker Oats does not participate in this segment
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Quaker Snacks: Financial Projections
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2000 - 05 CAGR*
------------------------------
Revenue* EBIT*
-------- -----
Base Growth Rate 8.0% 10.8%
Additional Revenue upsides $200MM by Yr. 5 $34MM by Yr. 5
thru distribution gains
International Distribution gains Not Included (N.I.) N.I.
-------------------------------------------------------------------------------
Leveraging Quaker brand N.I. N.I.
into A.M. snacks
Leveraging Gatorade trademark N.I. N.I.
into p.m. snacking
Additional Nutrition Snacks N.I. N.I.
*All numbers are approximate
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Other Food Business: Leadership Brands
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2000E Other Food Sales Mix(a)($MM)
----------------------------------
[Quaker Oatmeal
[Aunt Jemima logo omitted] logo omitted]
#1 Syrup #1 Hot Cereal
Rice Pilaf International Foods 20% US Hot Cereal 20%
[logo omitted]
Other US/Canada Foods 12% [CAP'N CRUNCH
Rice A Roni logo omitted]
[logo omitted] Aunt Jemima 6%
#1 Value-Added Rice]
Golden Grain 14% US RTE Cereal 28%
[LIFE
logo omitted]
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2000E Sales: $2.6B
2000E EBIT Margin: 17%
1996-2000E EBIT CAGR: 4%
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(a) 2000 estimates
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Long-Term Financial Assumptions
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CAGR 2000 - 2005
----------------
Revenue EBIT
------- -----
PepsiCo Standalone 7.2% 10.2%
Quaker Standalone 6.4% 8.7%
- Gatorade 9.4% 13.5%
- Snacks 8.0% 10.8%
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- Food 3.3% 4.5%
-------------------------------------------------------------------
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Synergy Opportunities: 2000 - 05
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Revenue ($MM) EBIT ($MM)
------------- ----------
Standalone PepsiCo 6 - 7% 10 - 11%
--------------------------------------------------------------------------------
Synergies
Year 1 $ 65MM ($ 10MM Revenue + $ 55MM Cost)
Year 5 $ 230MM ($ 80MM Revenue + $ 150MM Cost)
Pro Forma PepsiCo 7%+ 11%+
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Pro Forma PepsiCo: Below-the-line Assumptions
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Net Interest Expense Estimated Tax Rate
-------------------- ------------------
Pro Forma 2000 (e): $215MM PepsiCo 32%
Est. 2002 (e): $50MM Quaker 34%
2005 (e): $200MM Pro Forma (e): 32.4%
Opportunity to reduce
tax rate by 1-2 points for
combined entity in the
next 2 years.
Not included in the model
-------------------------
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Pro Forma PepsiCo : Capex
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Capex % of Sales 2000 (e) 2005*
--------------- -------- -----
PepsiCo standalone 5.5%
Quaker Standalone 5.7%
---
Pro Forma PepsiCo 5.5% 4.5%
=== ===
Additional Opportunities -- Not modeled
-----------
o Capex avoidance/reduction through supply chain rationalization.
o Better capital equipment procurement through increased scale.
o On-going capex benefit from transaction integration.
*All numbers are approximate
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Long-Term Financial Algorithm
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Revenue Growth EBIT Growth EPS Growth ROIC
2000-2005 2000-2005 2000-2005 2000
-------------- ----------- ---------- ------
PepsiCo Standalone 6 - 7% 10 - 11% 12 - 13% 22%
Quaker Standalone 5 - 6% 8 - 9% 10 - 12% 41%
Pro Forma PepsiCo(a) 7%+ 11%+ 13 - 14% 24%
+600 - 700 bps
by Yr. 5
(a) Pro forma PepsiCo/Quaker with synergies
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PepsiCo Pro Forma: Portfolio Mix (w/o synergies)
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RTE Cereal 3% Pepsi-Cola Worldwide 21% Tropicana 9% Gatorade 8%
Frito-Lay Worldwide 50%
Hot Cereal 3% Quaker Snacks 2%
Other Foods 4%
2000 (E) Revenue
----------------
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Leading Global Food and Beverage Company
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Global Food & Beverage Companies Global Food & Beverage Companies
Food & Beverage Sales ($MM) Food & Beverage Sales ($MM)
Nestle $46,577 Kraft/Nabisco $ 5,336
Kraft/Nabisco $37,281 Nestle $ 5,334
Unilever/Bestfoods $34,848 Coca-Cola $ 5,239
ConAgra $27,973 Unilever/Bestfoods $ 4,111
PepsiCo/Quaker Oats $25,172 PepsiCo/Quaker Oats $ 4,091
Coca-Cola $20,829 PepsiCo $ 3,312
PepsiCo $20,115 ConAgra $ 1,969
Danone $11,346 HJ Heinz $ 1,810
General Mills/Pillsbury $10,064 Kellogg/Keebler $ 1,434
Kellogg/Keebler $ 9,825 General Mills/Pillsbury $ 1,388
HJ Heinz $ 9,538 Campbell Soup $ 1,268
Sara Lee $ 8,783 Danone $ 1,224
Campbell Soup $ 6,294 Sara Lee $ 877
Quaker Oats $ 5,057 Quaker Oats $ 779
Source: 2000 estimates
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PEPSICO INC. LOGO QUAKER LOGO
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Management Team at Closing
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Steven Reinemund
Chairman and
Chief Executive Officer
PEPSICO INC. LOGO
Roger Enrico Robert Morrison
Vice Chairman Vice Chairman
Indra Nooyi Chairman, CEO and
President and President Quaker Oats
Chief Financial Officer
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PEPSICO INC. LOGO QUAKER LOGO
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