PepsiCo Agrees to Buy 66% of Wimm-Bill-Dann for $3.8 Billion

PepsiCo Inc., the world's largest maker of sweets, agreed to buy a majority stake in Wimm-Bill-Dann Dairy & Juice Co. for $ 3.8 billion to become the largest food and beverage company in Russia.

PepsiCo buys 66 percent of Wimm-Bill-Dann, and plan to bid for the remainder, subject to government approvals, the companies said today. The price of U.S. $ 33 per share is 32 percent more than average in the last 30 days, they said.

This is the biggest purchase yet to strengthen PepsiCo beverage business in Russia, following the 2008 acquisition of a controlling stake in OAO Lebedyansky, the country's largest juice maker. Wimm-Bill-Dann, whose brands include dairy products and baby foods Agusha chudo has nearly doubled its sales since 2005.

"PepsiCo has acquired one of the best Russian domestic food and beverage distribution networks," said Andy Smith, an analyst at MF Global in London.

actions Wimm-Bill-Dann rose to 74 percent and was up to 1,429.64 rubles, or 62 percent, to 3,730.15 as of 16:35 rubles in Moscow. PepsiCo fell 39 cents to $ 65.24 at 9:32 am in trading on the New York Stock Exchange.

Including assumed debt, PepsiCo is paying 19.8 times earnings before interest, taxes, depreciation and amortization. The median multiple similar deals since 2001 is 9.66 times EBITDA, according to the data.

Russian History

PepsiCo dates in its history in Russia to try first former Soviet leader Nikita Khrushchev of Pepsi, the drink was made available to the Soviet public shortly thereafter. By contrast, drinks Coca-Cola Co. 's were not widely available until 1989 with the opening of the first McDonald's restaurant in Moscow.

PepsiCo opened its first production plant in Russia in 1974 and has invested 3 billion U.S. dollars in the last decade. Is the intensification of the expansion in a market where growth is projected to exceed U.S.

Russia's economy is forecast to grow 3.8 percent this year, the government estimates. U.S. will expand 2.7 percent in 2010, according to November 18 OECD estimates. Russian dairy market will expand at a "low double digit" rate of at least the next three years, the company forecast.

Outside North America

The acquisition of all securities of Wimm-Bill-Dann at $ 5.4 billion and is part of PepsiCo's plan to build a business supply 30 billion in 2020. Wimm-Bill-Dann, the largest dairy company in Russia, had sales of about $ 2.4 billion in the 12 months ended in June. PepsiCo generates about 52 percent of U.S. sales Coca-Cola gets 25 percent of sales in North America.

Danone SA in October completed the sale of a stake of 18.4 percent in the Russian company for $ 470 million. French yogurt maker transferred the operation to meet the needs of competition on its merger with Unimilk, another dairy company in Russia. That sale price worth all Wimm-Bill-Dann at about $ 2.6 billion.

"PepsiCo is interested in Wimm-Bill-Dann is in very good shape and has shown very strong bottom line," said Victoria Sokolova, an analyst at Troika Dialog. "PepsiCo business segment will juice solids, and also be able to expand their own milk and baby food segments."

Andrey Goltsblat, managing partner at the law firm Goltsblat Moscow, which focuses on mergers and acquisitions, said the decision to PepsiCo for the company was promoted by the Danone announced a merger with Russia Unimilk dairy farmers in June this year.

"Danone forced the hand of Pepsico," said Goltsblat by telephone.

foreign Wimm-Bill-Dann sounding name was chosen by its founders 18 years ago because consumers do not trust the local products at the time, according to its website.

Centerview Partners and Morgan Stanley acted as financial advisor to PepsiCo, and Davis Polk & Wardwell and the CIS Linklaters LLP provided legal counsel. JP Morgan provided financial advice for Wimm-Bill-Dann, and Latham & Watkins LLP acted as legal advisor.