July 31, 2010
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DPS Nets $900 Million Payment for 20-Year Distribution ...

DPS Nets $900 Million Payment for 20-Year Distribution Deal with PepsiCo    Dr Pepper Snapple Group agreed to new licensing and distribution deal for some of its brands with PepsiCo upon completion of PEP’s takeover of Pepsi Bottling Group and PepsiAmericas.  Deal lands DPS an unusual upfront $900 mil payment for new 20-yr deal with 20-yr renewals following that.  Under new licensing arrangement (which replaces all existing agreements between DPS and blue system), PepsiCo will distribute Dr Pepper, Crush and Schweppes in territories it already handles in US.  Besides those brands, deal will include Squirt and Canada Dry in Mexico and Vernors and Sussex in Canada.  In certain US territories “where it has a distribution footprint,” DPS will now sell some owned and licensed brands previously sold by PBG and PAS, including Sunkist, Squirt, Vernors and Hawaiian Punch.  DPS prexy/ceo hailed deal for maintaining co’s “balanced and flexible routes to market.”  Of course, 1 option was to retain brands to strengthen DPS’ own bottling system, but with both KO and PEP in hunt for those brands, it was hard to turn away from potential of massive payment, which will be used to pay down debt.

 

So how did DPS make out, then?  The $900 mil price tag “on the surface does not seem an unreasonable sum,” figures Credit Suisse’s Carlos Laboy.  But he pointed out, at as he did in an Oct report, that “investors have no way of knowing and may never know how much more was negotiated in other concessions.  We also wonder if the parties worked to satisfy FTC concerns or if more changes are necessary.”  As for PEP, the deal “carries a higher upfront cost than we expected, but locks in the long-term bottling profit stream, and is likely to help the regulatory approval process”  for the twin bottler acquisitions, said Deutsche Bank’s Marc Greenberg.  With PepsiCo filing updated documents on new DPS contracts, the expected close of PBG and PAS acquisitions is slated to be by end of Q1 rather than early in qtr. 


Written By: admin
Date Posted: 4/10/2008
Number of Views: 2438

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