Pepsi to Buy Grand Met’s U.S. Bottling Operations
Pepsico Inc. said Wednesday that it agreed to buy Grand Metropolitan Inc.’s soft-drink bottling operations for $705 million in a move that is expected to significantly boost Pepsico’s sales and profits.
Grand Metropolitan, the U.S. arm of Britain’s Grand Metropolitan PLC, is the third-largest independent bottler of Pepsi-Cola products in the United States and accounts for about 3.6% of Pepsi-Cola’s total domestic soft-drink volume, the company said.
Grand Metropolitan’s U.S. soft-drink business includes bottling operations on both coasts through its Atlantic Soft Drink Co. of South Carolina and Pepsi Cola San Joaquin, Calif. In the East, there are 22 Pepsi-Cola franchise territories in South Carolina, North Carolina, Kentucky, Georgia and Tennessee. In the West, there are five franchises.
Grand Met acquired Atlantic Soft Drink and Pepsi Cola San Joaquin in 1980. The two companies reported combined annual sales of $355 million in the year ended Sept. 30, 1987.
“This is a particularly attractive investment for us for strategic reasons,” said D. Wayne Calloway, Pepsico chairman and chief executive officer. “We expect the Grand Met franchise to significantly strengthen our soft-drink volumes and improve operating profits, both this year and well into the future.”
Part of Strategy
Pepsico said it expected the acquisition to produce a dilution of its 1988 earnings of 4 cents a share after financing costs. However, the company believes that it will still meet its earnings target for the year.
Grand Metropolitan PLC, Britain’s 12th-largest company, has a vast array of operations that include alcoholic beverages, retail, hotels, betting and gaming, food, and eye-care centers. Its U.S. operations include Inter-Continental Hotels, Pearle Health Services, Alpo Pet Foods and Heublein Inc.
Ian Martin, chairman and chief executive of Grand Met’s U.S unit, said the company was selling the bottling operations for strategic reasons. “Grand Met’s fundamental business strategy is to develop and grow leading brands in our core businesses,” Martin said in a statement.
