Federal Trade Commission allows purchase of Quaker Oats by PepsiCo to proceed
NEW YORK (AP) – The Federal Trade Commission cleared the way on Wednesday for PepsiCo Inc. to acquire Quaker Oats Co. for about $13.4 billion in stock, giving the beverage giant the popular Gatorade brand and making it a leader in the fast-growing sports drink market.
The commission acted after deadlocking 2-2 on the question of whether to have its staff seek a preliminary injunction to stop the deal, said FTC spokeswoman Cathy MacFarlane.
The deal had raised concerns within the government about the possibility that it could harm competition because of PepsiCo’s ownership of All-Sport, which competes with Gatorade, Quaker’s top-selling sports drink.
Following the FTC announcement, Pepsi said it would go forward with the sale of All-Sport to Monarch Co. of Atlanta, a relatively small player in the beverage industry that owns Dad’s Root Beer, Bubble Up and Moxie.
But that didn’t ease the worries of two commissioners who said the deal would give PepsiCo too much power in the beverage industry.
In a statement, commissioners Sheila F. Anthony and Mozelle W. Thompson said ”PepsiCo’s acquisition of Quaker Oats is unlawful and contrary to the public interest.
”As a result of the Commission’s failure to act today, we believe that consumers of sports drinks and, indeed, all soft drinks will suffer the consequences,” the statement said.
The other two commissioners who voted, Orson Swindle and Thomas B. Leary, said concerns could be addressed later if they emerge.
Quaker Oats makes a long line of other products, including Cap’n Crunch cereal and Aunt Jemima pancake mix.
Steve Reinemund, PepsiCo chairman and chief executive officer, said he was delighted with the FTC decision.
”We look forward to completing the deal shortly and putting in action the detailed consolidation plans we’ve been building,” he said in a statement.
Quaker’s chairman, president and chief executive, Robert S. Morrison, called it ”a great day for Quaker shareholders, for our portfolio of brands and for our people.”
Morrison was to be vice chairman of the combined company.
In midday trading on the New York Stock Exchange, Quaker Oats climbed $12.98, or nearly 15 percent, to $100.98 a share, while PepsiCo was down $2.66 at $43.97.
Adding Gatorade to its line of noncarbonated beverages gives PepsiCo the dominant brand in the $2.5 billion sports drink field. The company also sells Aquafina water, Lipton teas and Tropicana juices.
At least two PepsiCo rivals had eyed Quaker Oats: The board of Coca-Cola Co. abandoned talks to buy Quaker for a reported $15.75 billion late last year and French food conglomerate Danone SA backed away from a possible bid.
In the end, PepsiCo beat out its competitors with an offer that essentially was the same as one rejected by the Chicago-based Quaker Oats in November.
While picking up Gatorade was no doubt the primary thrust of this transaction for PepsiCo, analysts noted at the time the deal was announced last year that Quaker Oats’ food products, which include granola snack bars and rice cakes, complement PepsiCo’s line of salty snacks.
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