Consumer Products

Is Pepsi Looking at a Stake in SodaStream?

Source: courtesy of SodaStream
Israeli business newspaper Calcalist reported Wednesday morning that SodaStream International Ltd. (NASDAQ: SODA), the Israel-based maker of home soft drink dispensers, is holding talks related to selling a stake of 10% to 16% to a large soft-drink maker. Speculation naturally points first to PepsiCo Inc. (NYSE: PEP), which may be looking for a counterpunch to the tie-up announced last quarter between Coca-Cola Co. (NYSE: KO) and Keurig Green Mountain Inc. (NASDAQ: GMCR).

Other potential buyers include Dr Pepper Snapple Group Inc. (NYSE: DPS) and Starbucks Corp. (NASDAQ: SBUX), according to the report. Bloomberg reports that the selling price would be $52 a share, a premium of 33% to the stock’s opening price on Tuesday. Calcalist did not name its source for the information.

Coca-Cola acquired a 10% stake in Keurig Green Mountain for about $1.25 billion and signed a 10-year agreement that will give the smaller company an exclusive 10-year partnership with Coca-Cola for the production and sale of branded Coke products in single-serve, pod-based cold beverages.

If the Calcalist report is accurate, SodaStream’s market cap would rise to $1.1 billion, still a long way behind Keurig Green Mountain’s $14.5 billion.

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Of the potential buyers, Pepsi is the most likely suspect. The company is scheduled to report earnings on Thursday, so the timing is right for an announcement of a deal with SodaStream. Pepsi almost cannot afford to let Coke steal a march on it in what could be a large new market for home soda machines. Success in the home soda market is not guaranteed, however.

Coke introduced its BreakMate home and office soda machine in 1988 to a less than enthusiastic public. The machine weighed 60 pounds and cost about $1,800, so it was not exactly a design triumph. Whether the results will be different this time around is certainly arguable.

SodaStream, however, enjoyed a boost of around 11.5% in its share price Wednesday morning, to $42.02 in a 52-week range of $35.27 to $77.80. The deal between Coke and Keurig knocked SodaStream’s share price down from around $50 to around $36 on the day the deal was announced.

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