PepsiCo to Buy 2 Top British Snack Firms : Had Been Bought by France’s BSN From RJR Nabisco
PepsiCo Inc. said today that it has agreed to pay $1.35 billion in cash for two large British snack food makers that the French food and beverage giant BSN bought from RJR Nabisco Inc. just a month ago.
The companies, Walkers Crisps and Smith Crisps, were acquired by BSN as part of its purchase of RJR Nabisco’s European food operations. RJR had sold those operations to reduce some of the debt from its record $24.5-billion buyout by Kohlberg Kravis Roberts & Co. completed earlier this year.
Walkers and Smith are among Britain’s largest sellers of potato chips and snack foods, with sales estimated at $460 million this year.
“This acquisition makes PepsiCo the largest snack food producer in Europe,” PepsiCo Chairman D. Wayne Calloway said in a statement.
“It provides us with a great strategic opportunity to aggressively develop the entire European market, an opportunity that takes on added significance because of the elimination of trade barriers in 1992.”
When the 12 nations in the European Community drop their trade barriers in 1992, they will succeed in creating a mammoth market of more than 300 million people. Many international companies, including American firms, are jockeying for position in order to be prepared for what will be a very different market.
Wall Street, though, wasn’t enthusiastic about PepsiCo’s move. In late-morning trading today on the New York Stock Exchange, PepsiCo fell 50 cents to $52.75 a share.
PepsiCo said the acquisition is expected to dilute 1989 earnings by about 8 cents per share. Company spokesman James Griffith said that the sale was for cash and that PepsiCo would finance the purchase with short-term debt, probably in the commercial paper market.
For all of 1988, PepsiCo earned $762.2 million, or $2.90 a share.
PepsiCo, based in Purchase, N.Y., is one of the world’s largest consumer products companies with sales of $13 billion last year, 37% of which came from snack foods. Among its well-known businesses are Pepsi-Cola Co., Seven-Up International, plus the Pizza Hut, Taco Bell and Kentucky Fried Chicken restaurant chains. Its snack food operations, which hold a 60% market share in the United States, manufacture products under the name Frito-Lay, Doritos and Lays.
BSN, which had 1988 sales totaling $7 billion, produces biscuits, dairy and other grocery products, beer, champagne and mineral water.
BSN had purchased five RJR businesses June 6 for $2.5 billion. Besides Walkers and Smith, they included the British biscuit business of Nabisco Brands; the Belin Group, a French biscuit and pastry business, and Saiwa, a biscuit and snack producer in Italy.