Pepsi Sheds an Asset

Pepsico, Inc. (NYSE:PEP) sold its money-losing Chinese bottling operations to Tingyi-Asahi, a venture between Tingyi, Japan’s Asahi Group Holdings Ltd. and Ting Hsin (Cayman Islands) Holding Corp., which sells ready-to-drink tea, bottled water and juices in China. In exchange Pepsi will receive a 5 percent shareholding in Tingyi-Asahi, and an option to enhance the same to 20 percent by October 2015.

The alliance will “significantly” enhance PepsiCo’s beverage business in China in the near term, Chairman and Chief Executive Officer Indra K. Nooyi said in a separate statement. It will also maximize “PepsiCo’s future growth potential in the fastest-growing beverage market in the world,” she said.

Pepsi (NYSE:PEP) also said the alliance with Tingyi would provide “better localized service to PepsiCo’s national retail and food service customers in China through TAB’s distribution expertise.” Tingyi estimates it will gain $257 million from the stake swap with PepsiCo, the Tianjin, northern China-based company said. The actual amount to be booked will likely be different since the estimated figure is only based on latest available financial information, according to its statement.

“It’s a smart deal for Pepsi (NYSE:PEP) because bottling plants are a non-core asset for them and trading the asset for a stake in Tingyi will benefit them in the long run,” said Titus Wu, an analyst with DBS Vickers Hong Kong Ltd. “With Tingyi’s vast distribution network in China, PepsiCo can go deeper across the country and make its products available in more smaller cities, where competitors may find it difficult to reach.”

Here’s how Pepsi is trading today:

  • Pepsico, Inc. (NYSE:PEP): The shares recently traded at $61.93, down $0.87, or 1.39%. Its market capitalization is $96.82 billion. They have traded in a 52-week range of $58.50 to $71.89. Volume today was 1,282,528 shares versus a 3-month average volume of 10,731,800 shares. The company’s trailing P/E is 15.53, while trailing earnings are $3.99 per share. The company pays a dividend of $2.06 per share for a dividend yield of 3.30%. About the company: PepsiCo, Inc. operates worldwide beverage, snack and food businesses. The Company manufacture or uses contract manufacturers, market and sell a variety of grain-based snacks, carbonated and non-carbonated beverages and foods in countries throughout the world. Get the most recent company news and stock data here >>

Investing Insight: Starbucks Corp Earnings Cheat Sheet: Profits Grow by Double Digits For Fifth Straight Quarter