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Coke, PepsiCo battle to buy Quaker |
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November 21, 2000
ATLANTA (AP) — Coke and Pepsi are showing a strong thirst for Gatorade as they battle to acquire the maker of the energizing sports beverage, Quaker Oats Co., at a time when sales of carbonated soft drinks seem to be running out of gas. Demand for non-fizzy sports drinks is on the rise, industry analysts say, and Gatorade is leading the way with more than 80 percent of the U.S. market. Coca-Cola Co., whose products include Gatorade rival Powerade, was expected to hold a board meeting Tuesday to discuss a possible transaction roughly two weeks after Quaker Oats rejected a $14.8 billion buyout offer from PepsiCo. Atlanta-based Coke confirmed Monday it was in talks with Quaker, but said there was no guarantee a deal would be reached. ``Any agreement must be consistent with our strategic program and enhance our ability to increase value to our shareowners and our other constituents, as well as deliver value to consumers,'' said chairman and chief executive officer Doug Daft. Quaker head Robert Morrison called PepsiCo's bid earlier this month insufficient. Food industry analysts said Monday that another bid from Pepsi is possible, but that Coke is in a better position to pay the highest price. ``I think it would make sense for Coke or Pepsi to own Gatorade, and it would probably make sense for each of them to try to keep the other from owning Gatorade,'' said John Sicher, editor of the industry publication Beverage Digest. A spokesman for PepsiCo, which is based in Purchase, N. Y., declined comment. Quaker Oats, whose board of directors reportedly met over the weekend to discuss possible deals with Coke and France's Danone SA, did not return calls Monday. Danone, which makes Evian and other bottled water brands, has refused to comment. Caroline S. Levy, an analyst with UBS Warburg in New York, issued a summary on the speculation about Quaker, which included reports that Coke was considering a stock swap valued at $16 billion, or $116.70 a share. Coke is ``in a position to pay much more than Pepsi,'' Levy later said. ``I think they are the forerunner, with Pepsi in the second spot.'' If Coke were to acquire Quaker Oats, it probably would have to sell off or eliminate its Powerade brand to satisfy antitrust concerns, Levy said. Powerade accounts for 11 percent of the sports drink market. PepsiCo also sells a sports drink, All Sport. Although best known for its cereal brands, Quaker has posted 11 straight quarters of double-digit profit gains thanks largely to the beverage line, which accounts for more than 40 percent of company sales. Both Coke and Pepsi could boost Gatorade's sales by putting the sports drink in vending machines across the country, said John McMillin, a food analyst for Prudential Securities in New York and a Quaker shareholder. ``Gatorade is growing in North America while cola growth has stalled, so I think both Coke and Pepsi could accelerate Gatorade's growth by expanding distribution channels,'' McMillin said. For Danone, a deal with Quaker Oats would give it a stronger foothold in the expanding U.S. market for non-carbonated beverages. Earlier this year, Danone made an unsuccessful joint bid with Cadbury Schweppes PLC to buy Nabisco Holdings Corp., but was beat out by Philip Morris Cos. On the Net: Quaker Oats: http://www.quakeroats.com Coca-Cola: http://www.cocacola.com Danone: http://www.danone.com PepsiCo: http://www.pepsico.com/ |