PepsiCo’s ambitions to entrench its foothold in Africa received a major boost yesterday after the Competition Commission gave its proposed $1.7 billion (R25.52bn) takeover of South Africa’s food distribution giant, Pioneer Foods, the go-ahead. Photo: Mark Lennihan/AP

JOHANNESBURG – Nasdaq-listed PepsiCo’s ambitions to entrench its foothold in Africa received a major boost yesterday after the Competition Commission gave its proposed $1.7 billion (R25.52bn) takeover of South Africa’s food distribution giant, Pioneer Foods, the go-ahead.

The antitrust body said it had given the transaction a conditional green light, saying it would have not have negative implications for the local industry.

The commission said it recommended that the Competition Tribunal approve the takeover in which Simba, a PepsiCo subsidiary, would acquire Pioneer Foods, whose food staple brands include Sasko, Weet-Bix, Liqui-Fruit and Ceres. 

The commission said it had recommended the tribunal approve the merger subject to a moratorium on merger-related retrenchments for a certain period and the creation of additional jobs at the merged entity. 

The commission also called for significant investment in the operations of the merged entity, the agricultural sector, and the establishment of an enterprise development fund and for an empowerment deal to the tune of R1.6bn that would promote a greater spread of ownership and participation by workers.

“The commission found that the proposed transaction, which will result in significant public interest benefit for South Africa, including the transfer of at least R1.6bn in equity to workers, is unlikely to result in a substantial prevention or lessening of competition in any relevant markets,” said the commission.

Pioneer Foods is a South African producer and distributor of a range of branded food and beverage products. It operates mainly in South Africa, providing wholesale, retail and informal trade customers with its products and exports to more than 80 countries. 

In July, PepsiCo, which distributes well-known brands that include Lays, Dorito’s, NikNaks and Fritos through Simba, unveiled its plans to take over Pioneer Foods, saying it wanted to create Africa’s leading beverage company led from South Africa.

The company promised to support the country’s economic empowerment fundamentals, employment and also boost local suppliers.

PepsiCo said the move was a step towards achieving its growth ambitions on the continent, adding it would gain a solid beachhead for expansion into Sub-Saharan Africa by enabling scale and distribution.

It also announced it would acquire Pioneer Foods shares for R110 a share or $1.7bn, saying the deal would be funded through a combination of debt and cash. In October, the deal was approved unanimously by shareholders.

PepsiCo’s chief executive for Africa, the Middle East and South Asia, Eugene Willemsen, said the company was closer to creating a leading African food and beverage business, by building on Pioneer Foods’ platform.  

“PepsiCo and Pioneer Foods are committed to scaling our business across the African continent with a locally relevant product portfolio,” Willemsen said. “Together, we have a shared vision for building a more sustainable future for Africa.

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