Food and beverages giant PepsiCo Inc. (PEP) said Tuesday that it has reached an agreement with Dr Pepper Snapple Group Inc. (DPS) to manufacture and distribute certain Dr Pepper products following Pepsico's acquisition of two anchor bottlers, Pepsi Bottling Group Inc. (PBG) and PepsiAmericas Inc. (PAS). Looking ahead, PepsiCo revised its outlook for fiscal 2009, while reaffirming its forecast for fiscal 2010.
Under the agreement, PepsiCo will be entitled to manufacture and distribute Dr Pepper and certain other Dr Pepper products in the territories where they are currently distributed by Pepsi Bottling and PepsiAmericas.
The new licensing deal will replace existing agreements of Dr Pepper with Pepsi Bottling and PepsiAmericas will have an initial term of 20 years, with automatic 20-year renewals thereafter.
PepsiCo will distribute Dr Pepper, Crush and Schweppes in the U.S., Dr Pepper, Crush, Schweppes, Vernors and Sussex in Canada, and Squirt and Canada Dry in Mexico. In U.S. territories, where it has a distribution footprint, Dr Pepper will begin selling certain owned and licensed brands, including Sunkist soda, Squirt, Vernors and Hawaiian Punch, that were previously sold by Pepsi Bottling and PepsiAmericas.
As a part of the deal, Dr Pepper will receive an upfront payment of $900 million payable upon closing of the acquisitions. Dr Pepper expects to recognize the one-time payment over the estimates life of the license deal and recorded as net sales.
The company said it will use the net proceeds from the transaction to reduce its overall debt obligations in-line with its target capital structure of about 2.25 times total debt to EBITDA after certain adjustments.
PepsiCo expects to complete the proposed transactions by the end of the first quarter of 2010, subject to Pepsico completing its acquisitions of Pepsi Bottling and PepsiAmericas.
In August, PepsiCo had reached definitive agreements with Pepsi Bottling and PepsiAmericas to acquire the remaining shares in its bottlers for about $7.8 billion in cash or stock. The acquisitions would create one of the largest food and beverage companies globally.
PepsiCo currently owns 33% of the outstanding shares of Pepsi Bottling and 43% of the outstanding shares of PepsiAmericas.
The company also said it plans to form a new entity comprising the bottling businesses, effective upon closing of the mergers. The new unit will be called PepsiCo Bottling North America, or PBNA, and Eric Foss, current chairman and chief executive officer of Pepsi Bottling, will become its CEO, reporting to PepsiCo Chairman and CEO Indra Nooyi.
Looking ahead, PepsiCo said it has started increasing investments in targeted areas that will support improved growth and profitability in 2010 and beyond.
For fiscal 2009, PepsiCo expects constant currency net revenue to be up about 5% and earnings per share to increase about 5% to 6%, in core constant currency, off of its fiscal 2008 core earnings of $3.68 per share.
Analysts polled by Thomson Reuters expect the company to report earnings of $3.76 per share on revenue of $43.15 billion for the year. Analysts' estimates typically exclude special items.
Based on current spot rates, foreign exchange translation would represent about a five percentage point adverse impact to PepsiCo's full-year, core constant currency earnings per share, the company noted.
Earlier, the company estimated mid-to high-single-digit constant currency growth for both net revenue and core earnings per share over last year.
For fiscal 2010, PepsiCo reaffirmed its target of 11% to 13% growth for core constant currency earnings per share off of expected fiscal 2009 core earnings per share. Street estimates earnings of $4.22 per share on revenue of $51.54 billion for the year 2010.
The 2010 outlook excludes one-time costs to achieve the synergies associated with its acquisitions of Pepsi Bottling and PepsiAmericas and assumes the company completes the acquisitions by the end of the first quarter of 2010.
PepsiCo closed Tuesday's regular trading session at $63.48, down 75 cents or 1.17% on a volume of 6.16 million shares. In the after-hours, the shares further lost 48 cents.
Dr Pepper ended Tuesday's regular trading session at $26.75, down 19 cents on a volume of 0.99 million shares. In the after-hours, the shares gained $1.31 or 4.90%.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.