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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 The 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."
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 CEO, 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 Quakers 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.
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.
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