SodaStream Surges in New York as PepsiCo Denies Bid Plan
SodaStream International Ltd. (SODA) surged to the highest price since 2011 in New York trading after Israeli media reported that PepsiCo Inc. (PEP) and Coca-Cola Co. are considering bids for the home soda-machine maker.
PepsiCo denied the report on business website Calcalist that it’s in talks to buy SodaStream for more than $2 billion. Coca-Cola declined to comment on a report from newspaper Globes that it may bid for the Airport City, Israel-based company.
SodaStream Chief Development and Communications Officer Yonah Lloyd said in an e-mail that the company doesn’t comment on rumor and speculation.
SodaStream is growing rapidly at a time when the $183 billion global market for carbonated beverages is slowing. The company is seeking to more than double sales to $1 billion by 2016. Researcher Euromonitor International estimates that annual growth in carbonated beverages will weaken to 2 percent through 2017 from 4 percent in the past four years.
The stock rose 2.7 percent to $71.24 at the close in New York, the highest since August 2011. It earlier surged as much as 45 percent in Germany to 78 euros, the equivalent of $102.86, before Jim Wilkinson, a PepsiCo executive vice president, said today in an interview that the speculation is “completely untrue.”
Kent Landers, a Coca-Cola spokesman in Atlanta, said the company doesn’t comment on rumors and speculation.
“While we think Coke and Pepsi are more aware of SodaStream than they were two or three years ago, we think some sort of partnership would be much more likely than an outright acquisition,” John Faucher, an analyst at JPMorgan Chase & Co. in New York, wrote today in a report. “We don’t see much in a way of distribution leverage by combining, which is what we believe you need to justify a deal.”
Chief Executive Officer Daniel Birnbaum said at a May 13 shareholder meeting he would “bet my last dollar” that PepsiCo and Coca-Cola will seek to enter the home soda market.
“I don’t know if they’re going to do their own syrup or they’re going to do it with us or try to get their own machine or something, but they can’t ignore that home soda is happening, and right now they’re not playing,” he said.
SodaStream’s $1 billion revenue target compares with last year’s sales of $436 million. That implies a compound annual growth rate of about 23 percent, according to analysts at Oppenheimer & Co.
SodaStream is the “Kleenex of home soda and that’s a very strong first-mover advantage that we intend to leverage,” the CEO said at last month’s meeting.
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. The company gets about 45 percent of sales from western Europe, with the Americas region accounting for about 39 percent.
PepsiCo has $7 billion of cash, giving it firepower for an acquisition. Mondelez International Inc. (MDLZ), the cookie and candy maker split off from Kraft Foods Group Inc. (KRFT) last year, has been touted as a potential target by analysts after Nelson Peltz’s Trian Fund Management LP disclosed stakes in both companies.