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ThaiBev-Pepsico pact end long stand-off over Serm Suk shares

By Kwanchai Rungfapaisarn

The Nation

Thai Beverage Logistics, an arm of Thai Beverage, which is owned by beverage tycoon Charoen Siriwattanabhakdi, entered an agreement with PepsiCo Group involving Bt6.4 billion-worth of shares of the bottling firm Serm Suk (SSC), bringing the long-standing row between PepsiCo Group and SS National Logistics to an end.

Meanwhile, ThaiBev aims to use SSC's strong logistics network to strengthen its business in non-alcoholic products.

SSC yesterday asked the Stock Exchange of Thailand (SET) for permission to suspend trading for the first half of the day because it had learned about the agreement between its two major shareholders - PepsiCo Group and SS National Logistics (SSN). PepsiCo Group includes Pepsi-Cola (Thai) Trading and Seven-Up Nederland BV.

In its filing to SET, the company said that PepsiCo Group was proposing to sell 110,461,960 SSC shares to Thai Beverage Logistics at Bt58 apiece. Previously, the market expected PepsiCo Group to offer no less than Bt60 for every Serm Suk share held by SS National Logistics. However, after SSC stocks resumed trading in the afternoon session, they closed 7.29 per cent lower at Bt57.25 each.

As a result, Thai Beverage Logistics will make a voluntary tender offer over 25 days from September 15 until October 19.

Thai Beverage president and CEO Thapana Sirivadhanabhakdi told the press yesterday that paying Bt58 apiece for Serm Suk's shares was acceptable, and that the payment would be made by Thai Beverage Logistics. He added that SS National Logistics had approached ThaiBev to buy Serm Suk's shares.

"We see Serm Suk's potential in fostering our vision to expand the non-alcohol side of our business," Thapana said, adding that the deal would also enable ThaiBev's marketer and producer of non-alcoholic products, Oishi, to capitalise on Serm Suk's strong logistics network.

So far, Oishi has been relying on ThaiBev Logistic in marketing its products, though Serm Suk's strong connections with eateries will definitely boost its sales, Thapana said.

ThaiBev Logistic has a registered capital of Bt1 billion and it spent around Bt3 billion on expanding its logistics network over the past four years.

Thapana said he was confident that Serm Suk, which has relatively low revenue compared to other beverage firms, would get a boost from ThaiBev. Serm Suk will still bottle and distribute Pepsi products until its contract ends next November.

The agreement between PepsiCo Group and SS National Logistics about who will be the share purchaser and the vendor, as well as the price and the number of shares to be sold, was initially decided on July 20 and then amended on August 16.

The company said the voluntary tender offer would be subject to conditions (unless waived by SSN) such as the directors nominated by PepsiCo Group resigning and the vendor not breaching its representation and warranties or the agreement in relation to the shares or shareholding in the company.

SS National Logistics previously bought 86.7 million shares of SSC or 32.62 per cent through a tender offer at a per-share price of Bt42. PepsiCo Group, through Pepsi-Cola (Thai) Trading and Seven-Up Nederland BV, owns 100.46 million shares or 41.55 per cent.

If SSN declines the price offered by PepsiCo Group, it will have to buy back the shares at the same price as offered by Pepsi, which currently stands at Bt58 each. Once the transaction has been completed, Thai Beverage Logistics will hold 41.5 per cent of SSC shares, while SS National Logistics will hold 32.62 per cent.

The two sides have entered a gentlemen's agreement to end the "Mexican stand-off" and allow the enterprise involved to get on with its business. This method of settling conflicts between two groups of shareholders has been popular overseas, an adviser for the deal who asked not to be named said.

PepsiCo Group's statement

Even though SS National Logistics decided to acquire Serm Suk's shares held by Pepsi at the price of Bt58 apiece, Pepsi will continue to go ahead with its alternative plan of bottling and distributing beverages in Thailand.

Pepsi assures investors that its financial health is stable and it can compensate for Serm Suk's bottling and distribution.

For several years, Pepsi has successfully cooperated with Serm Suk until their exclusive bottling appointment (EBA) will expire in November 2012. This will guarantee a continuity of products for customers, while Pepsi is in the process of establishing its new arm for bottling and distribution.

A survey early this year revealed that more than 70 per cent of Thai consumers voted Pepsi as their top brand.

-- The Nation 2011-09-10

[Arkady]

So Pepsi will no longer have a bottler and distributor in Thailand which used to be one of its star markets globally where it had a larger market share than Coke. The same thing happened to Carlsberg after they got in with the gentleman who is taking over Serm Suk. Goes to show the pitfalls of depending on a joint venture that you don't have majority control over.