What Price The Snapple Debacle?

Quaker Oats Co.'s $1.7 billion purchase of Snapple in late 1994 surely stands as one of the decade's worst acquisitions. With Snapple dragging it down, Quaker's stock stagnated while the Dow Jones industrial average moved up by roughly 70%. So now that Quaker is unloading the beverage brand, should its shareholders celebrate?

Mourning would be more appropriate. Like a death in the family, the Snapple debacle leaves behind a traumatized survivor, facing a difficult path to recovery. The price Quaker will pay for its soft-drink misadventure goes well beyond the $1.4 billion in losses directly associated with the sale of Snapple to Triarc Cos. for just $300 million. In addition, Quaker has absorbed $100 million-plus in cash losses and charges related to Snapple. And since the deal damaged its balance sheet, Quaker's credit rating has suffered, raising its cost of capital.