By Kathleen Martin
According to reports, PepsiCo (NYSE:PEP) made an offer for the Marilan Alimentos SA (Marilan) in the price range of $320 to $426 million for controlling interest in Marilan. The same news report indicated that there were two other bidders, Campbell Soup Company (NYSE:CPB) and Bunge Group (NYSE:BG) who refused to meet the price of the controlling Marilan shareholders.
Other news disclosed that PepsiCo acquired Brazilian Grupo Mabel without disclosing the purchase price, but sources stated PepsiCo would pay $450 million for the Grupo Mabel acquisition. The possible purchase of Brazilian cookie manufacturer Marilan Alimentos, SA by PepsiCo will add more geographic penetration of PepsiCo into Latin American markets as well as more real estate in the grocery aisles.
Should PepsiCo complete these acquisitions, it will make significant inroads in the Latin American markets by purchasing interests in the second-largest cookie and cracker producing nation worldwide. The United States is the first, with food giant Kraft Foods (KFT), which is number one in the world in biscuits, chocolate, gum, candy and nuts.
PepsiCo’s main beverage competition comes from Coca-Cola Inc. (NYSE:KO), which has larger market share in the worldwide beverage market, but Pepsi has a broader product range in snack foods, crackers, candy and biscuits, and therefore more shelf space in grocery stores. With the acquisition of the American Depository Receipts of Wimm Bill Dann, a Russian dairy and fruit drinks manufacturer, PepsiCo increased its footprint in Eastern Europe and Central Asia.
It appears that PepsiCo is embarking on acquisition strategies that increase its presence in emerging markets to absorb the pullback in the domestic markets. In addition, it appears to be making acquisitions in non-traditional beverages and snack foods to broaden its horizons and acclimate to local tastes and market needs.
Bunge Group (BG) does not appear to be a significant competitor to PepsiCo in the Marilan Alimentos SA bid, as it is more concentrated in the agribusiness and raw materials side of food processing. In December 2011, it announced its acquisition of Amrit Banaspati Edible Oils and Fats Business in India. In addition the November 2011 announcement of its joint venture with Bumiraya Investindo the Indonesian palm plantation subsidiary of PT Tiga Pilar Sejahtera Foods Tbk (TBS Foods) marking Bunge’s first investment in the palm oil industry, gives the Bunge Group a firm foothold in India and Indonesia. TPS Food is listed on the Indonesian Stock Exchange, and is a leading food company in Indonesia in palm production as well as rice processing and distribution in Asia.
Bunge Group is quoted in the same news release as stating that Bunge can “leverage its core capabilities and experience in a complementary value chain that represents over 30% of the world’s total vegetable oil production.” The prospect of Bunge being in the same race for a Brazilian biscuit maker does not meet its apparent acquisition program of purchasing companies complementary to their strategy and core competencies.
The Campbell Soup Company’s 2011 roster of news releases demonstrates concentration of domestic business and factory expansion, branding, corporate citizenship and promotion of its core products. Campbell’s focuses on promoting its traditional soups, casseroles and recipes as well as its marketing strategies for its products in its corporate releases. Campbell’s competes with PepsiCo in its snack food and desert business with its Pepperidge Farm brand and in the beverage aisle with its V8 Juice. As a competitor with PepsiCo and others in the international market, it does not appear to be a strategy Campbell is embracing.
The apparent competitors in bidding for Marilan Alimentos SA don’t appear to be in the same ballpark as PepsiCo. The rumours have not, to date, been verified by any party mentioned in the new releases, so it does call into question the validity of the rumours. The news releases mention financial information for Marilan from 2009 indicating the revenue was in the $220 million dollar range in that year but no further or more recent information is available. It appears, at the outset, to be a rumour manufactured to increase the acquisition price for the sellers.
Whether the acquisition happens or not, or happens at the speculated price(s) remain to be seen. It seems as though Campbell and Bunge don’t have the same interests in mind, and would not make any overtures to purchase the biscuit maker, let alone pay the price mentioned.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.