Pepsi to Offer Public Part of Its Bottling Operations

PepsiCo Inc. on Friday filed to sell part of its bottling business in one of the biggest U.S. initial public offerings, seeking to raise as much as $1 billion.

The world’s No. 2 soft-drink maker, in a Securities and Exchange Commission filing, didn’t disclose what percentage of the bottler would be sold or how much of its debt would be guaranteed by Pepsi. Analysts expect Purchase, N.Y.-based Pepsi to sell more than a 50% stake, which would take a low-margin, cash-intensive business off its books.

The move structures PepsiCo more like Atlanta-based archrival Coca-Cola Co., which shed its bottling operations in 1986. Beverage industry watchers have hailed the reorganization of PepsiCo’s bottling operations, followed by the public offering, as necessary for Pepsi to mount a formidable challenge to Coke in the cola wars.

“This is consistent with Pepsi’s strategy,” said Credit Suisse First Boston analyst Martin Romm. “Pepsi Bottling Group will flourish under a separate structure and be more competitive to Coke under a separate structure.”

In 1997, Pepsi spun off its restaurant operations to the public.

Pepsi shares rose 63 cents to close at $41.38 on the New York Stock Exchange.

Pepsi, whose board approved the sale in November, said in July 1998 that it was considering selling a bottling stake to the public.

In October, Conoco Inc., the eighth-largest U.S. oil company, raised $4.4 billion in the largest-ever U.S. IPO. Lucent Technologies Inc.’s $3.03-billion IPO in April 1996 ranks second.

Pepsi Bottling accounts for 54% of all Pepsi beverages sold in North America and 32% worldwide. Its North American distribution system has about 7,000 trucks and delivers more than 100 million eight-ounce servings a day.

Pepsi’s domestic company-owned bottling operations had $6.6 billion in revenue in 1997, out of total revenue of $20.9 billion. That doesn’t include bottlers in Russia, Spain and Greece recently added to Pepsi Bottling.