CPG giant establishes joint venture with buyer PAI Partners to retain 39% non-controlling stake in juice business
The deal is worth $3.3bn in pre-tax proceeds
Source: PepsiCo

PepsiCo has divested part of its Tropicana and Naked Juice business arm for pre-tax proceeds of $3.3 billion via a joint venture with private equity firm PAI Partners.

The deal will see the CPG behemoth retain a 39% non-controlling stake of the brand in the JV, including exclusive US distribution rights via small-format and foodservice channels.

PAI will take over the Tropicana North American business, with an additional option to sell certain juice businesses in Europe.

“This joint venture with PAI enables us to realise significant upfront value, whilst providing the focus and resources necessary to drive additional long-term growth for these beloved brands,” PepsiCo chairman and CEO Ramon Laguarta said.

“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,” he added.

The juice business delivered approximately $3 billion in net revenue in 2020 with operating profit margins that were below PepsiCo’s overall operating margin in 2020.

The Wall Street Journal has reported that overall juice sales have steadily declined over time, despite a temporary boost during the Covid-19 pandemic.

According to Beverage Marketing Corp, fruit juice and fruit drink consumption fell 19% to 2.8 billion gallons in 2020 from 3.4 billion in 2011.

PepsiCo expects to use the proceeds from the sale to strengthen its balance sheet and make organic investments in the core business.

The transaction is expected to close in late 2021 or early 2022.

PAI Partners have extensive experience in the food and beverage space, having invested in ice cream manufacturer Froneri and healthy food manufacturer Ecotone.

It manages around €15 billion of dedicated buyout funds and, since 1994, has completed 84 investments in 11 countries, representing over €65 billion in transaction value.

Frédéric Stévenin, managing partner at PAI, said of the deal: “We believe there is great growth potential to be realised through investments in product innovation, expansion into adjacent categories and enhanced scale in branded juice drinks and other chilled categories.

“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,” he added.

Centerview Partners is acting as financial advisor to PepsiCo, while Gibson, Dunn & Crutcher is acting as the company’s lead counsel.

JP Morgan Securities is acting as financial advisor, Willkie Farr & Gallagher as legal counsel and Latham & Watkins LLP as financing counsel to PAI.

During PepsiCo’s Q2 earnings call in July, Laguarta noted a shift in consumer habits towards healthier food and drinks choices, with portion control a trend that would likely continue.

“Portion control, we’re seeing that as a strategy consumers are following and that’s giving us huge growth in our variety packs and multi-packs and that I think will continue as a trend we’re capturing,” Laguarta said.

“The other one is, as consumers move into healthier spaces in our categories, clearly non-sugar is growing very fast. We have a very good portfolio that is gaining share in that particular space,” he added.

Date published: 4 August 2021

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