PepsiCo will retain a 39% non-controlling interest in the newly formed joint venture with the French private equity firm. The deal covers the brands across North America and Europe.
The beverage and snack giant says the sale will allow it to concentrate on a portfolio of products that are ‘better for people and planet: such as zero-calorie beverages, healthier snacks and SodaStream.
New portfolio focus
PepsiCo bought Tropicana from Seagram Company for $3.3bn in 1998, representing the biggest acquisition ever undertaken by the company. In 2006, it added Naked Juice to the portfolio for $150m.
While PepsiCo's juice businesses delivered around $3bn in net revenue in 2020, the company says operating profit margins that were below its overall operating margin. PepsiCo plans to use the proceeds from the sale of these assets primarily to strengthen its balance sheet and to make organic investments in the business.
Its beverage focus in 2021 and beyond is not on juice: but on categories such as energy, sport, and new consumption models such as at-home sparkling water maker SodaStream.
"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."
PAI is a private equity firm managing around €15bn of dedicated buyout funds, with experience in the food and beverage space (it is currently invested in Froneri, the world's #2 ice cream manufacturer, and sustainable food company Ecotone). It will be the majority shareholder of the new business, with PepsiCo retaining exclusive US distribution rights to the portfolio of brands in its best-in-class, chilled Direct Store Delivery for small-format and foodservice channels.
“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."
The transaction is expected to close in late 2021 or early 2022, subject to customary conditions, including works council consultations and regulatory approvals.