PAI Partners has agreed to acquire Tropicana, Naked and other select juice brands from PepsiCo Inc. The pre-tax cash proceeds of this deal will be about $3.3 billion. When the transaction closes, PepsiCo will retain exclusive U.S. distribution rights to the portfolio of brands in its chilled direct store delivery for small-format and foodservice channels.
PepsiCo, Inc. (NASDAQ: PEP) today announced that it has entered into an agreement with PAI Partners (PAI) to sell Tropicana, Naked and other select juice brands across North America, and an irrevocable option to sell certain juice businesses in Europe, which will result in combined pre-tax cash proceeds of approximately $3.3 billion while retaining a 39% non-controlling interest in a newly formed joint venture. PAI, a leading private equity firm with strong experience in the food and beverage space, will be the majority shareholder of the transferred business, with PepsiCo retaining exclusive U.S. distribution rights to the portfolio of brands in its best-in-class, chilled Direct Store Delivery for small-format and foodservice channels.
“This joint venture with PAI enables us to realize significant upfront value, whilst providing the focus and resources necessary to drive additional long-term growth for these beloved brands,” said PepsiCo Chairman and CEO Ramon Laguarta. “In addition, it will free us to concentrate on our current portfolio of diverse offerings, including growing our portfolio of healthier snacks, zero-calorie beverages, and products like SodaStream which are focused on being better for people and the planet.”
“We are delighted to bring these storied beverage brands into the PAI portfolio through another partnership with a leading global food and beverage company. We believe there is great growth potential to be realized through investments in product innovation, expansion into adjacent categories, and enhanced scale in branded juice drinks and other chilled categories,” said Frédéric Stévenin, a Managing Partner at PAI. “We are also thrilled that PepsiCo will remain involved as our partner in the joint venture as we execute our plans to drive the future success of these brands.”
These juice businesses delivered approximately $3 billion in net revenue in 2020 with operating profit margins that were below PepsiCo’s overall operating margin in 2020. PepsiCo expects to use the proceeds from the sale of these assets primarily to strengthen its balance sheet and to make organic investments in the business. The transaction is expected to close in late 2021 or early 2022, subject to customary conditions, including works council consultations and regulatory approvals.
Centerview Partners LLC is acting as financial advisor to PepsiCo. Gibson, Dunn & Crutcher LLP is acting as lead counsel to PepsiCo, and Davis Polk & Wardwell LLP as U.S. tax and antitrust counsel. J.P. Morgan Securities LLC is acting as financial advisor to PAI. Willkie Farr & Gallagher LLP is serving as legal counsel to PAI, and Latham & Watkins LLP is acting as financing counsel.