Pepsi Bottling Group says Pepsi's $4.2 billion takeover proposal has no fizz

The Pepsi Bottling Group, (PBG) the world's largest manufacturer, seller and distributor of Pepsi-Cola beverages has rejected Pepsi's $4.2-billion cash-and-stock takeover proposal yesterday, citing the bid as ''grossly inadequate.''

Last month, Pepsi had offered to buy all the outstanding shares of common stock it does not already own in its two largest anchor bottlers, The Pepsi Bottling Group (PBG) and PepsiAmericas (PAS), for $29.50 and $23.27 per share respectively - a premium of 17.1 per cent over the closing price of the common stock of each company on 17 April. (See: Pepsi offers to buy out its two bottlers for about $6 billion)

PBG, whose annual sales turnover is nearly $14 billion, said in a letter to Chairman and CEO of Pepsi Indra Nooyi that its board of directors has rejected Pepsi's offer, since the board concluded that the proposal was grossly inadequate and not in the best interests of PBG and its stockholders.

PGB said that the 17.1 per cent premium that Pepsi was paying was inadequate since the proposal was made just prior to the public release of PBG's strong first quarter 2009 earnings released on 22 April.

''PBG has exceeded Wall Street expectations for the quarter, raised its full-year guidance for earnings per share and operating free cash flow, and provided details of its plans to achieve over $250 million in cost and productivity savings in 2009 on a standalone basis,'' the bottler said.

PBG said that that Pepsi's proposal was substantially below PBG's intrinsic value and there was virtually no premium to market given PBG's first quarter earnings and upward revision to full-year EPS and operating free cash flow guidance.