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Sometimes it takes years for buyout chatter to come to fruition.
PepsiCo (NASDAQ: PEP) is announcing that it will be acquiring SodaStream (NASDAQ: SODA) in an all-cash deal valued at $3.2 billion. Both boards have approved the transaction that will cash out SodaStream investors at $144 a share. The purchase is expected to close in January, as long as the majority of SodaStream shareholders vote in favor of the deal.
It's been years since the potential of PepsiCo buying SodaStream first bubbled to the surface. An Israeli business publication wrote that the world's second largest beverage company was in talks to buy SodaStream -- paying as much as $2 billion or $96 a share -- in the springtime of 2013. The chatter was quickly debunked by PepsiCo, and it took a little more than five years with plenty of twists and turns along the way to finally happen.
Image source: SodaStream.
Pop tart
The PepsiCo buyout is bittersweet. SodaStream is rolling these days, and it doesn't seem as if investors are getting much of a buyout premium given the kind of momentum in the corner of the company behind the namesake makers of carbonated beverages. PepsiCo's Monday morning press release bills the proposed purchase as a 32% premium to the stock's 30-day average, but that's not exactly fair. SodaStream stock soared after coming through with another blowout quarter earlier this month. PepsiCo is picking up one of the beverage industry's hottest stocks for a mere 11% markup to Friday's close.
Desperate companies accept 11% premiums, not stocks hitting all-time highs earlier this month. Out-of-favor investments sign off on a mark-up of 11%, not a stock that has been an 11-bagger since bottoming out in early 2016. This month's stellar quarter was enough to send the stock into the triple digits for the first time ever. Revenue and earnings per share soared 31% and 78%, respectively. You don't just hand over the keys to someone in a cash buyout for a meager premium -- unless you know that rough days are coming in the future.
SodaStream has been here before. It was rolling back in 2013 when the PepsiCo chatter was fizzing. SodaStream was already a rock star -- OK, a pop star -- in Europe and making waves in the soda-thirsty U.S. market when the original story matching the two companies up surfaced. It was growing despite soft drink consumption trends declining, and it had no problem calling out the cola giants in Super Bowl ads and traveling exhibits. SodaStream was on top of the world, until it wasn't. Sales began to slump. The novelty of making soft drinks at home started to wear thin.