PepsiCo shares close lower on Friday, company to acquire Pioneer Food Group for $1.7 billion

PepsiCo Inc (PEP) said on Friday that it had agreed to acquire Pioneer Food Group of South Africa in a deal valued at $1.7 billion.

According to PepsiCo, Pioneer Food Group’s portfolio is complementary to its own and is expected to help the company expand in sub-Saharan Africa through the addition of manufacturing and distribution capabilities.

PepsiCo shares closed lower for the eighth time in the past fourteen trading sessions on NASDAQ on Friday. It has also been the steepest daily loss since January 9th. The stock went down 2.10% ($2.79) to $130.09, after touching an intraday low at $130.00, or a price level not seen since June 5th ($128.86).

Shares of PepsiCo Inc have risen 17.75% so far in 2019 compared with an 18.74% gain for the benchmark index, S&P 500 (SPX).

In 2018, PepsiCo’s stock went down 7.87%, thus, it again underperformed the S&P 500, which registered a 6.24% loss.

PepsiCo’s offer is estimated at 110 rand ($7.89)* per Pioneer Food ordinary share.

“Pioneer Foods forms an important part of our strategy to not only expand in South Africa, but further into sub-Saharan Africa as well,” Ramon Laguarta, PepsiCo’s Chairman and Chief Executive Officer, said in a statement, cited by Reuters.

Pioneer Food Group, which owns brands such as Liqui Fruit juice, Weet-Bix cereal and Sasko bread, is another South African consumer goods company to be bought out. In 2018, Clover Industries, which processes a range of products such as olive oil, beverages and yogurt, began discussing a possible takeover with a consortium of companies – Milco SA.

*1 US Dollar equals 13.9409 South African Rand

Analyst stock price forecast and recommendation

According to CNN Money, the 19 analysts, offering 12-month forecasts regarding PepsiCo Inc’s stock price, have a median target of $136.00, with a high estimate of $150.00 and a low estimate of $110.00. The median estimate represents a 4.54% upside compared to the closing price of $130.09 on July 19th.

The same media also reported that at least 14 out of 23 surveyed investment analysts had rated PepsiCo Inc’s stock as “Hold”, while 7 – as “Buy”. On the other hand, 1 analyst had recommended selling the stock.