PepsiCo (NASDAQ: PEP), the American-based global food, snack, and beverage company, has inked a deal to sell Tropicana, Naked, and other select juice brands across North America to PAI Partners. The agreement also includes an irrevocable option to sell certain juice businesses in Europe.
The deal will result in combined pre-tax cash proceeds of $3.3 billion, and PepsiCo will retain a 39% non-controlling interest in the newly formed joint venture.
Per the terms of the agreement, PAI, the private equity firm experienced in the food and beverage space, will be the majority shareholder of the transferred business. Furthermore, exclusive U.S. distribution rights are reserved by PepsiCo to the portfolio of brands in its chilled Direct Store Delivery for small-format and foodservice channels, the company said.
Net revenue of $3 billion was recorded by these juice businesses last year. Markedly, PepsiCo is likely to use the proceeds of the deal in strengthening its balance sheet and making investments in the business.
The deal, which awaits certain customary closing conditions and approvals, is likely to close this year. (See PepsiCo stock charts on TipRanks)
Sharing his thoughts about the deal, PepsiCo CEO Ramon Laguarta said, “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.”
Laguarta added, “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.”
Following the Q2 results this July, Wells Fargo analyst Christopher Carey reiterated a Hold rating but lifted the stock’s price target to $160 (2.4% upside potential) from $147.
Based on PepsiCo’s upbeat Q2 results, Carey expects the company to meet its updated outlook.
Overall, PepsiCo shares have a Moderate Buy consensus rating, based on an equal split between the Buys and the Holds, with 7 ratings each. The average PepsiCo price target of $165.31 suggests an upside of 5.8% from the current levels.
TipRanks’ Hedge Fund Trading Activity tool shows that confidence in PepsiCo is currently Positive, as the cumulative change in holdings across all 17 hedge funds that were active in the last quarter was an increase of 512,000 shares.