PepsiCo has struck a deal to buy South Africa’s Pioneer Food Group for $1.7 billion, the companies said, lifting Pioneer’s shares and boosting a sector that has been hit by drought and tough trading conditions.
The U.S. drinks and snack group said on Friday that Pioneer’s product portfolio was complementary to its own and would help PepsiCo 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 ($7.94) 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% to more than 100 rand. Shares in agribusiness investment company Zeder Investments (ZEDJ.J), which holds Pioneer as part of its portfolio, also rose more than 22%.
“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.—Reuters