The maker of at-home soda machines and flavors, SodaStream (NASDAQ: SODA) has been at the epicenter of buyout speculation for the better part of two years. These rumors revolve around the hope that a beverage giant could rejuvenate its tarnished Americas brand, which saw sales decline 14% versus 2013 during the second quarter of this year, by scooping up the troubled beverage company.
To no surprise, Coca-Cola's (NYSE: KO) investment in Monster Beverage (NASDAQ: MNST) reignited this fire, leading some to speculate that Dr. Pepper Snapple (NYSE: DPS), Starbucks (NASDAQ: SBUX), or PepsiCo (NYSE: PEP) may get anxious and acquire the at-home soda maker; each of the noted companies have been connected to SodaStream in some way during the last year.
Yet, for a company with so much buyout potential, its stock remains near 52-week lows, and after every rumor-induced stock pop, SodaStream's gains quickly fizzle away. Hence, as we assess the company's buyout potential, and the companies who may show an interest, this is a very telling fact to keep in mind.
What's the latest chatter?
Bloomberg recently reported that SodaStream is in talks with an investment firm to be taken private. The transaction would value the company at $40 a share, or $828 million .
Granted, the article made sure to mention that no final agreement has been met, and that the deal could still fall apart. Albeit, the "people" familiar with the matter asked not to be identified due to the discussions being private.
A very telling history lesson
With all things considered, this is not the first time by any means that SodaStream has been at the epicenter of buyout rumors. For quite some time Wall Street has speculated that large beverage companies could view SodaStream as an opportunity to enter the at-home do-it-yourself single-serve soda business.
In fact, many of these rumors have been very detailed: Back in April an Israeli newspaper called Calcalist reported that PepsiCo, Dr. Pepper Snapple, or Starbucks were all interested in acquiring a 10% to 16% stake in SodaStream, conveniently before each company reported earnings.
PepsiCo has been the most speculated company, especially as its soft drink volumes had fallen in previous quarters. Many thought that SodaStream could reignite sales and create a spark. However, in its second quarter the company saw beverage volume return to positive territory and guided for EPS growth of 8% year-over-year in 2014. Therefore, PepsiCo has announced no such plans to acquire SodaStream, and with two quarters passing since the original report, it doesn't appear that they will.
Next is Dr. Pepper Snapple, a company that trails its two larger soft drink peers, which thereby has fueled the belief that it could make a run for SodaStream. Yet, Dr. Pepper Snapple has announced no such plans, and has performed well fundamentally with 1% sales growth in the first two quarters of 2014 .
An interesting twist that lacked an outcome
Lastly is Starbucks, which adds the most interesting twist to the SodaStream buyout saga. Back in April following the 10% to 16% SodaStream investment report, PepsiCo and Dr. Pepper Snapple had already reported first quarter earnings, and with no mention of SodaStream. Then, prior to Starbucks's quarterly report, the publication site Globes reported that Starbucks was nearing a 10% stake in SodaStream for a then 30% premium .
As investors would guess, Starbucks announced nothing, nor did it give any hints of interest in SodaStream during its second quarter either. Starbucks is a company that's clicking on all cylinders, seeing comparable sales growth of 6% in its last quarter. Not to mention, the company is growing its K cup business rapidly, creating further questions of why it would even want SodaStream?
Is it any surprise?
With all things considered, and given SodaStream's most recent history with acquisition rumors, is it any surprise the stock's trading at $32 right now, well off the $40 takeout price?
These are rumors that are often unconfirmed, from questionable or unknown sources, and have noticeably lost their appeal in recent months. Hence, if you're investing in SodaStream in hopes of a quick takeover stock pop, then chances are, you'll be waiting awhile!
Given the entire situation surrounding SodaStream, what's most alarming is that even after losing half its valuation in the last year, the company still can't find a big beverage buyout partner. Not to mention, the lack of interest that surrounds SodaStream is happening in the face of consolidation within the big food and beverage sector. This is a company that's apparently tapped in the Americas region with just under $41 million in revenue during its last quarter, a region that should be a strength, yet continues to see double digit sales declines.
Therefore, perhaps private equity is showing some interest in SodaStream right now, but the problem is that as acquirers dig deeper and realize the company's liability in North America, it's hard to imagine any talks materializing to and resulting in a buyout. In other words, if no company on either the public or private side wants SodaStream after a near 50% valuation decline in the last year, then why should you?
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.