As we reported last week, Pepsi offered to spend about $6 billion to acquire the balance of its two major bottlers, Pepsi Bottling Group and PepsiAmericas. Both companies rejected the offers, with the usual claim that the buyer was undervaluing the companies and failing to account properly for synergies.
The next step in that dance is for Pepsi to raise its offer. Instead, the soft drink and snacks company went for Plan B. That option described after the jump (and we now know who is representing PBG and PepsiAmericas).
Pepsi made the offer for PBG on April 19 and the board rejected the offer on May 4. Included in the rejection of the offer was an announcement that the board had also adopted a poison pill and entered into retention agreements with certain key executives (read: “golden parachutes”).
But wait! Pepsi already owns 33% of its former subsidiary, so how could this happen without Pepsi knowing? Good question, and the company wants an answer.
Pepsi has filed suit against PBG and certain of its directors, alleging the “defendants intentionally failed to provide notice of a recent PBG Board meeting to the PBG directors affiliated with PepsiCo.”
Get ready for another Delaware mess. We’re going to be talking Revlon, Lyondell, Paramount v QVC, Paramount v Time, and all the other M&A favorites for a few weeks.
We’re already pondering one quick question: If Revlon duties don’t kick in until the company is either out being shopped or faced with a transaction that would result in a change of control, couldn’t the defendants argue that they’re already effectively controlled by the holder of 33% of the equity? That would be a pretty neat trick, since they tried to adopt the pill without involving that holder, though.
We don’t know who is handling the litigation yet, but the deal teams are Davis Polk’s Gar Bason (Harvard BA ‘75, JD ‘78) for PepsiCo on both deals; Robert Townsend (Harvard AB ‘87, JD ‘90) of Cravath for PBG, and James Morphy (Harvard AB ‘76, JD ‘79) of Sullivan & Cromwell for PepsiAmericas. For what it’s worth, PBG’s investment banker is Morgan Stanley’s Rob Kindler, a former Cravath partner.
Pepsi’s official statement (excluding the cautionary statements and whatnot)
PURCHASE, N.Y., May 11 /PRNewswire-FirstCall/ — PepsiCo (NYSE: PEP) announced today that it has filed suit in Delaware against the Pepsi Bottling Group (NYSE: PBG) and certain of its directors. The suit alleges that the defendants intentionally failed to provide notice of a recent PBG Board meeting to the PBG directors affiliated with PepsiCo. At that meeting, the directors in attendance claim to have adopted a “poison pill,” implemented certain new executive compensation arrangements and purported to amend the PBG bylaws in ways PepsiCo believes are detrimental to its rights as a shareholder. Because of the lack of notice and consideration by the full Board, PepsiCo alleges those actions by the Board at the meeting are invalid. PepsiCo further alleges that PBG and its Board breached their fiduciary duties to PBG shareholders by adopting the poison pill because it restricts PepsiCo’s rights as a PBG shareholder and constitutes an unreasonable and disproportionate response to PepsiCo’s constructive proposal. The suit seeks declaratory and injunctive relief.
On April 19, 2009, PepsiCo made a proposal to acquire all of the outstanding shares of common stock that it does not already own in its two largest anchor bottlers, PBG and PepsiAmericas (NYSE: PAS), at a value of $29.50 per share for PBG and $23.27 per share for PAS. PepsiCo currently owns 33% of the outstanding shares of PBG and 43% of the outstanding shares of PAS.
On May 4, 2009, PBG announced that its Board had rejected PepsiCo’s proposal. In addition, PBG also announced that its Board had approved adoption of a shareholder rights plan, commonly referred to as a “poison pill,” as well as retention arrangements for certain key employees and amendments to PBG’s bylaws regarding notice and informational requirements for shareholder actions.
PepsiCo reiterates its belief that its offers are full and fair and in the best interests of PBG, PAS and their respective shareholders.
For more information about PepsiCo’s proposal with respect to PBG and PAS, please access our website at .http://www.transactioninfo.com/pepsico
Related posts:
Bring back the 1898 logo!
Funny, there's another Robert Townsend at MoFo
http://www.mofo.com/attorneys/356/summary.html
Really? That's who you think of when you hear "Robert Townsend"? Not the guy from Hollywood Shuffle? http://www.imdb.com/name/nm0870186/