Topic: Growth Stocks

The Wall Street Stock Forecaster Hotline – Friday, April 24, 2009

Article Excerpt

PEPSICO INC., $48.52, New York symbol PEP, makes soft-drink syrup, which its sells to its authorized bottlers. The bottlers then make the finished product and distribute it to retailers. This week, PepsiCo announced that it plans to buy its two main bottlers: Pepsi Bottling Group Inc. (New York symbol PBG) and PepsiAmericas, Inc. (New York symbol PAS). The takeover will cost PepsiCo roughly $6 billion in cash and shares, but it would let the company consolidate plants and administrative functions. PepsiCo’s management feels this would save $200 million a year, and increase annual earnings by $0.15 a share. Both bottlers’ shareholders must agree to the takeover. However, both stocks are trading above the value of PepsiCo’s offer. That suggests shareholders expect a higher bid, but the takeover will probably succeed. That’s because PepsiCo already owns 33% of Pepsi Bottling Group and 43% of PepsiAmericas, and its dominant position limits their appeal to other potential bidders. Meanwhile, PepsiCo reported that it earned…