PepsiCo shares close lower on Monday, company to acquire China brand Be & Cheery for $705 million

PepsiCo Inc (PEP) said that it would acquire China’s Be & Cheery snack brand from domestic jujube maker Haoxiangni Health Food Co Ltd in a deal valued about $705 million.

PepsiCo shares closed lower for the fourth time in the past ten trading sessions on NASDAQ on Monday. It has also been the steepest single-session loss since October 2nd 2019. The stock went down 2.20% ($3.21) to $142.64, after touching an intraday low at $142.58, or a price level not seen since February 4th ($142.10).

Shares of PepsiCo Inc have risen 4.37% so far in 2020 compared with a 0.15% loss for the benchmark index, S&P 500 (SPX).

In 2019, PepsiCo’s stock went up 23.71%, thus, it underperformed the S&P 500, which registered a 28.88% gain.

“Be & Cheery adds direct-to-consumer capability, positioning us to capitalize on continued growth in e-commerce, and a local brand that is able to stretch across a broad portfolio of products, through both online and offline channels,” Ram Krishnan, Chief Executive Officer of PepsiCo Greater China, said in a statement, cited by Reuters.

“We also expect to leverage Be & Cheery’s innovation and consumer insights capabilities to drive innovation in other key PepsiCo growth markets,” Krishnan added.

Shareholders of Haoxiangni are still expected to vote on the transaction, which is also subject to certain regulatory approvals and other customary conditions.

Established in 2003, Be & Cheery is among the largest online snack companies in China, as it reported nearly CNY 5 billion ($711.7 million) in revenue last year.

Analyst stock price forecast and recommendation

According to CNN Money, the 17 analysts, offering 12-month forecasts regarding PepsiCo Inc’s stock price, have a median target of $145.00, with a high estimate of $164.00 and a low estimate of $115.00. The median estimate represents a 1.65% upside compared to the closing price of $142.64 on February 24th.

The same media also reported that at least 11 out of 19 surveyed investment analysts had rated PepsiCo Inc’s stock as “Hold”, while 4 – as “Buy”. On the other hand, 1 analyst had recommended selling the stock.