maz

Why Is Pepsico Buying Its Bottlers?

I agree with much of what is said in the article but I also think that this is a defensive move because bottlers thin margins can easily be erased in a recession. Having them in house avoids public spats or embarassing cash infusions from Pepsico as the parent company is unlikely to reduce the cost of syrups & concentrates to bottlers. I predict that margins will decline & the bottlers will be a drain on free cash flow long term. Corporations always spin an acquisition to be a positive and gloss over the negatives which include paying a premium for the shares.

Still whether accretive (I think it will be marginally accretive but will not give a good ROI) or defensive it would appear to be a reasonable move by the company.