Pepicana to sell juice brands for $3.3 B

- PepsiCo Inc. will sell Tropicana, Naked and other juice brands to French firm PAI Partners for about $3.3 billion as it seeks to bolster its financial position and focus on healthier snacks and zero-calorie drinks.

The U.S. drinks giant will retain a 39% noncontrolling interest in a new holding company for the brands and has also granted PAI an irrevocable option to buy certain juice businesses in Europe, according to a statement Tuesday.

PepsiCo said it plans to use the proceeds from the deal to strengthen its balance sheet and invest in the wider business.

Paris-based PAI is an experienced investor in the food and beverage space and is behind Refresco, the biggest independent bottler of beverages in the world. PAI's proposed joint venture with PepsiCo is similar to one it created when it merged its R&R Ice Cream business with large parts of Nestle's Ice-cream division to create Froneri.

'This joint venture with PAI enables us to realize additional upfront value, while providing the focus and resources necessary to drive long-term growth for these beloved brands, said PepsiCo Chairman and Chief Executive Ramon Laguarta in the statement.

'In addition, it will free us to concentrate on our current portfolio of diverse offerings, including growing our portfolio of healthy snacks, zero-calorie beverages and products like SodaStream which are focused on being better for people and planet, he said.

In 2020, the PepsiCo juice businesses deliver a net revenue of about $3 billion. Chief Financial Officer Hugh Johnston noted in an interview that the margins for the business are lower than PepsiCo's average, and that the deal will 'incrementally benefit margins'.

'The juice category has obviously had some challenges over the past 10 or so years and recently we started to think about where we wanted to prioritize our efforts and we decided that it might make sense for someone else to run Tropicana, Johnston said.

The deal allows PepsiCo to focus its efforts elsewhere in its portfolio, while still enjoying some of the juice division's revenue. The Purchase, New York-based company will also continue in a distribution role, Johnston said, with the joint venture selling products to PepsiCo and PepsiCo distributing to smaller stores and restaurants along with other venues.

PepsiCo shares were up 0.4% to $157 in premarket trading Tuesday in New York. The stock was up 5.4% this year through Monday, compared to 17% for the S&P 500 index.

Centerview Partners LLC is an investment adviser for PepsiCo, while JPMorgan Chase Co. is advising PAI. The transaction is expected to close in early 2021 or in late 2022.