Last week signalled the beginning of the serious courting period for PepsiCo as it attempts to tie the knot with Pioneer Foods. The next 12 or so months will be full of promise, interspersed with occasional frustrations, as the US-based food and drinks group tiptoes through a potential minefield of shareholder and regulatory approvals.
In April 2017, according to sources close to the company, the country’s credit downgrading by two rating agencies proved to be too big a flaw to ignore. Merger talks, which had gone on for 10 long months, were abandoned. It is an indication of PepsiCo’s keenness to get a foothold in SA that those talks had survived so long during what was one of the most turbulent periods in our country’s history.
The reality is that behind the headlines there is a lot that works well in SA and the rest of Africa. And while the R23.5bn price tag makes this one of PepsiCo’s largest deals outside the US, it’s not much more than one week’s revenue for the third-largest food group in the world. Evidently a price worth paying for access to the long-promised African renaissance.
If this goes through, Rands (profits) will leave SA instead of staying here to be reinvested locally. That’s deflationary and will result in adding to slowdown.
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