Skip to main content

International Business PepsiCo to buy South Africa’s Pioneer Food for $1.7-billion

MARIO ANZUONI/Reuters

PepsiCo has struck a deal to buy South Africa’s Pioneer Food Group for $1.7-billion, the companies said on Friday, lifting Pioneer’s shares and boosting a sector that has been hit by drought and tough trading conditions.

The U.S. drinks and snack group said on Friday that Pioneer’s product portfolio was complementary to its own and would help PepsiCo to expand in sub-Saharan Africa by adding manufacturing and distribution capabilities.

“Pioneer Foods forms an important part of our strategy to not only expand in South Africa, but further into sub-Saharan Africa as well,” PepsiCo Chairman and CEO Ramon Laguarta said in a statement.

Story continues below advertisement

PepsiCo has offered 110 rand ($7.94) per Pioneer ordinary share in what would be its second largest deal since 2010, the companies said, with the news lifting the South African company’s shares by 29.32 per cent to more than 100 rand.

Shares in agribusiness investment company Zeder Investments, which holds Pioneer as part of its portfolio, also rose more than 22 per cent.

“It’s a vote of confidence in South Africa at a time when we really need it,” Pioneer CEO Tertius Carstens told Reuters.

Food producers have struggled amid a slump in retail sales as consumers cut back and dry weather hit maize and other produce.

Pioneer, which uses maize in many of its products, reported a decline in half-year earnings in May, weighed down by shortages in the staple food.

“It’s almost a signal to other overseas companies that we are open for business. If PepsiCo is willing to put money down it may lift sentiment of other foreign investors that might come looking at South Africa for bargains,” said Greg Davies, equities trader at Cratos Capital.

Pioneer, whose brands include Weet-Bix cereal, Liqui Fruit juice and Sasko bread, is the latest consumer goods firm to be the target of a buyout after South Africa’s Clover Industrie, which processes products including yogurt, beverages, and olive oil, began takeover talks with a consortium of companies called Milco SA last year.

Story continues below advertisement

Pioneer was in talks over a potential deal with “a multinational organization” in 2017, but that fell apart after South Africa’s credit rating was cut to junk status.

Pioneer and PepsiCo declined to comment whether those talks referred to them.

Pioneer exports to more than 80 countries. Its deal with PepsiCo is conditional on regulatory approvals.

Report an error
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter