PepsiCo has struck a deal to buy South Africa’s Pioneer Foods Group for $1.7 billion (Sh170 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 US drinks and snack group said that Pioneer’s product portfolio was complementary to its own and would help it 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.
PepsiCo has offered 110 rand (Sh794) 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.
“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 for bargains,” said Greg Davies, equities trader at Cratos Capital.