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SodaStream Rally Wanes on M&A Doubts: Israel Overnight

SodaStream International Ltd. pared gains in New York trading as speculation wanes that PepsiCo Inc. or Coca-Cola Co. were in talks to buy the Israeli producer of in-home soda makers.

The stock advanced 2.7 percent to $71.24 after shares traded in Germany surged as much as 45 percent to the equivalent of $102.86 following reports in Israeli media that the largest U.S. beverage makers were interested in buying the company. Partner Communications Co. rose the most on the Bloomberg Israel-US Equity Index, which advanced 1.5 percent. Allot Communications Ltd. fell 2.3 percent to $11.50, widening its discount to Tel Aviv-listed shares to about 4 percent.

PepsiCo denied a report on business website Calcalist that it’s in talks to buy SodaStream for more than $2 billion, and Coca-Cola declined to comment on a report from newspaper Globes that it may make a bid, while JPMorgan Chase & Co. said a partnership was more likely than an acquisition. It wouldn’t make sense for Coca-Cola or PepsiCo to buy a maker of machines used in home kitchens, according to Kenneth Shea, a Bloomberg Industries analyst in Skillman, New Jersey.

“These rumors are groundless,” Shea said in a telephone interview. “It’s inconsistent with business models of both PepsiCo and Coca-Cola -- they don’t make appliances.”

SodaStream’s head of investor relations Yonah Lloyd said via e-mail that the company does not comment “on rumor and speculation” when asked if it was in talks with PepsiCo and Coca-Cola.

Soda Making

SodaStream’s soda-making system, which employs reusable bottles, CO2 cylinders, tap water and a range of more than 160 flavor syrups, is sold in 45 countries. PepsiCo has $7 billion of cash, giving it firepower for an acquisition.

The stock has surged 24 percent since May 13, when Chief Executive Officer Daniel Birnbaum predicted revenue of $1 billion by 2016, compared with last year’s sales of $436 million. Trading volume in SodaStream shares exceeded an average daily level by six times in New York yesterday.

Barclays Plc almost doubled its target for SodaStream to $100 on June 3 as analyst David Kaplan said concerns that at-home soda making is a “fad” are overblown. The valuation reported by the Calcalist seems “reasonable”, he wrote in a note yesterday, adding that an acquisition by a company such as PepsiCo would make strategic sense.

‘Very Hard’

“If Coca-Cola or Pepsi buys SodaStream, then the penetration of SodaStream would go through the roof overnight,” Jim Chartier, an analyst at Monness Crespi Hardt & Co. in New York, who has a buy recommendation on the stock, said by phone yesterday. “It’s SodaStream’s gas exchange business that is very hard to replicate. Whoever buys them, would have an access to that technology.”

The Bloomberg Israel-US Equity Index of the 25 largest Israeli companies traded in the U.S. advanced to 92.16, extending this year’s gain to 6.7 percent. That compares to a 3.3 percent gain on the benchmark TA-25 Index in 2013.

Alon Blue Square Israel Ltd. gained 0.4 percent to $3.39 in New York yesterday, widening the discount to its Tel Aviv-traded shares to 3.7 percent.

Partner increased 4.5 percent to $6.45 in New York yesterday, as trading volume exceeded the average daily level for the past three months by almost four times. The Tel Aviv shares added 1.2 percent to 23.07 shekels, or $6.37.

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