Pepsi Philippines to be sold to Lotte for P4.16 Billion

Pinoy Money Talk

South Korean conglomerate Lotte Corp., through its subsidiary Lotte Chilsung Beverage Co., will be the new owner of Pepsi-Cola Products Philippines Inc. (PIP) upon completion of a Tender Offer announced last week by PIP.

Pepsi-Cola Philippines, a local company that owns the Philippine bottling and distribution rights to products of US-based PepsiCo., is offering to sell to Lotte more than 2.134 billion common shares — representing 57.78% of its total outstanding stock.

The offer price is P1.95 per share, valuing the deal at P4.16 billion. The price is a 39% premium on the P1.40 closing price of PIP on Tuesday, Dec. 10.

As of November 2019, Lotte Corp. already owns 42.22% of PIP. If the entire 2.134 billion shares are acquired by Lotte, its ownership will rise to 100% making it a wholly-owned subsidiary of the Korean conglomerate.

Still, the entire acquisition will depend on the acceptance by PIP’s minority shareholders of the Tender Offer. Any PIP shareholder during the offer period of December 12, 2019 to January 15, 2020 is given a choice to either:

(1) accept the Tender Offer and get paid P1.95 per share; or

(2) keep the shares and remain a shareholder of the company.

PIP Tender Offer and Stock Delisting
Shareholders of Pepsi Philippines (PIP) who will participate in the Tender Offer until January 15, 2020 will be paid P1.95 per share. (Image source: Unsplash)

How much will PIP’s shareholders get from the Tender Offer?

Those who will accept the Tender Offer will receive the payment — net of stock transaction tax, broker’s commission, and other sell side customary fees due on the transaction — on February 7, 2020.

The net tender offer price is estimated to be P1.9324 per share after all fees have been deducted.

Interested shareholders may submit their acceptance of the Tender Offer until January 15, 2020 at 5:00 pm (or earlier, depending on the stockbroker, so check with your own broker).

Will PIP be delisted from the PSE?

According to Pepsi Philippines (PIP), they currently have no plans to delist voluntarily from the PSE. However, should Lotte be able to acquire a significant majority of the tendered shares, the minimum public float could fall below 10%.

If this happens, PIP will fail to comply with the 10% public ownership rule set by the PSE, which means involuntary delisting procedures will be initiated. This means trading of PIP will be automatically suspended for a period of six (6) months and, if during the said period, the company was still unable to comply with the required 10% public ownership, then automatic delisting will follow.

Simply speaking, upon delisting, PIP will no longer be traded on the PSE.

What happens if I won’t accept the Tender Offer?

Any PIP shareholder has the option not to accept the tender offer. This could be the case if their original purchase price is significantly higher than the P1.95 tender offer price.

If, for example, you bought PIP at P5.00 per share (during its heyday in 2017) and still held on to it now, accepting the tender offer at P1.95 per share would instantly lead to a 61% loss. However, not selling your shares could lead to cumbersome ownership once PIP shares are delisted from the PSE.

Upon delisting, shares will no longer be traded in the PSE. Thus, the sale and exchange of PIP stocks will be done using stock certificates and not anymore via scriplesss or electronic shares using an online trading platform. It will also be now more difficult to find buyers of PIP and, since there is no public trading of these stocks, the price will be subjectively decided by the buyer and seller.

For a detailed resource on stock delisting, read: What to do if my stock gets delisted?

Pepsi Products in the Philippines

Pepsi Philippines currently markets and distributes the following beverage brands in the country:

  • Pepsi
  • Pepsi Max
  • Pepsi Light
  • Mountain Dew
  • 7-Up
  • Mirinda
  • Mug
  • Gatorade
  • Tropicana
  • Lipton
  • Sting
  • Premier
  • Milkis
  • Aquafina

Last September 2019, the company announced it is terminating local production of the local version of Cheetos due to losses but it has imported and will continue to import for sale the following snack brands:

  • Cheetos
  • Doritos
  • Ruffles
  • Red Rock Deli
  • Fritos
  • Tostitos
  • Sunchips
  • Smartfood
  • Munchies
  • Rold Gold

Revenues of Pepsi-Cola Philippines reached P18.4 billion from January to June 2019, an 11% increase from P16.58 billion in the same period in 2018.

Its Net Income was P446.06 million , reversing losses of P48.64 million incurred during the same period in 2018 due to the imposition of the TRAIN tax law.

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Pinoy Money Talk is an educational website about money, banking, investments, and personal finance which started in 2005. Its group of five writers consists of one equity research analyst, one fintech startup owner, one finance educator, and two investment professionals.