Aug. 21 (Bloomberg) -- Dr Pepper Snapple Group Inc., the third-largest U.S. soda maker, is evaluating distribution contracts for its Dr Pepper soft drinks after two of the brand’s largest bottlers agreed to a takeover by PepsiCo Inc., Chief Executive Officer Larry Young said.

PepsiCo’s purchase of Pepsi Bottling Inc. and PepsiAmericas Inc. would trigger a renegotiation of the Dr Pepper distribution agreements, Young said. That would give the company “very positive” options, he said. Taking back some Dr Pepper bottling may be a possibility, he said. PepsiCo agreed this month to buy the bottlers for about $7.8 billion, and has said the transaction may close by yearend.

The company has yet to begin negotiations with PepsiCo to renew the agreements, Young said. The contracts cover about a quarter of the amount of Dr Pepper sold in the U.S. They may result in as much as $350 million in annual gross profit for PepsiCo, said Judy Hong, an analyst with Goldman Sachs Group Inc. in New York. Young declined to comment on the estimate.

“Everything’s feasible,” Young, 54, said Aug. 19 in an interview in New York. “We always want our brand where it’s going to be in the strongest hands so that we continue our growth.”

Jenny Schiavone, a PepsiCo spokeswoman; Mary Viola, a spokeswoman for PepsiAmericas; and Jeff Dahncke, a Pepsi Bottling spokesman, declined to comment.

‘Very Happy’

Young said he’s “very happy” with the way the system is set up now. He said Dr Pepper Snapple wouldn’t owe termination fees if it canceled the agreements after a change in control of the distributors. Bottlers buy flavor concentrate and mix it with carbonation, water, sweeteners and other ingredients to make soft drinks for sale to retailers.

Young said he doesn’t know if PepsiCo is interested in buying the Crush orange soda brand, which Pepsi Bottling began distributing for Dr Pepper Snapple this year.

Dr Pepper Snapple, based in Plano, Texas, rose 35 cents, or 1.3 percent, to $27.25 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have advanced 68 percent this year. PepsiCo climbed 65 cents to $57.49. The shares have gained 5 percent this year.

Bottlers for Purchase, New York-based PepsiCo and Atlanta- based Coca-Cola Co. last year distributed 73 percent of the Dr Pepper sold in the U.S., according to a Dr Pepper Snapple regulatory filing.

Market Share

The brand helped the company take soda market share in the U.S. last year from Coca-Cola and PepsiCo, according to Beverage Digest, an industry newsletter. The publication estimates 27 percent of Dr Pepper in bottles and cans is distributed by Coca- Cola Enterprises Inc., 18 percent by Pepsi Bottling and 7.4 percent by PepsiAmericas. Dr Pepper Snapple declined to comment on the data.

The renegotiation could set up a bidding war between PepsiCo and Coca-Cola Enterprises, Coca-Cola’s largest bottler, Goldman’s Hong said. A sale of the rights to the contracts could fetch $2.5 billion or more before taxes or termination payments, she estimated. Hong recommends buying Dr Pepper Snapple shares.

Dr Pepper Snapple “has significant negotiating leverage with a potential buyer,” Hong wrote in an Aug. 13 note.

Fred Roselli, a spokesman for Coca-Cola Enterprises, declined to comment.

To contact the reporter on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net.

Last Updated: August 21, 2009 18:36 EDT