Will Pepsi Buy SodaStream?

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Shares of SodaStream International Ltd. (NASDAQ: SODA) were higher Friday on continued speculation that PepsiCo Inc. (NYSE: PEP) might be interested in buying the Israeli company. The chatter comes as Coca-Cola Co. (NYSE: KO) has acquired a 10% stake in Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR).

Green Mountain makes the single-drink Keurig coffee making system and plans to market a cold-beverage version of the system later this year or next. If Coca-Cola starts to make one-drink syrups for the Keurig, Pepsi would logically almost be forced to respond. This helps explain the chatter. After all, Coca-Cola and Pepsi compete fiercely around the world, and any move by one usually triggers a response.

Some of the speculation has been fanned by a report from Citron Research, which suggested that a Pepsi-SodaStream combine makes sense. SodaStream is already in the market with its water-carbonation system. The cold-drink Keurig doesn’t exist yet. Citron follows stocks that are heavily shorted.

Where the chatter gets interesting is that the Wall Street Journal suggested SodaStream does not quite fit with the soft-drink giants because a consumer adds syrup to taste. The soft-drink makers want more control over taste.

This is the second time SodaStream has been linked to PepsiCo. Speculation grew last spring as the stock neared its peak. But the stock has fallen sharply since peaking at $77.80 in June, when the New York Post reported the company was having trouble attracting buyout interest.

The shares were at $39.66, up $1.31 or 3.4%, just before noon ET. They had briefly reached $40.74 right after the open. Since bottoming at $35.27 on Monday, they have risen 12.5%.

SodaStream has generated a bit of publicity for itself by taking shots at Coke and Pepsi. The company was asked by Fox to get rid of a line directly attacking Coke and Pepsi in its recent Super Bowl ad with actress Scarlett Johansson. One issue worth noting is that SodaStream’s entire market value is worth less than the 10% stake is valued at in Green Mountain Coffee Roasters.

Maybe it is time to put the barbs away, and maybe it is time for a handshake.

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