The deal will be funded through a mix of cash and debt and is expected to close by the first quarter of 2020.
The deal "will help PepsiCo gain a solid beachhead for expansion into Sub-Saharan Africa by boosting the company's manufacturing and go-to-market capabilities, enabling scale and distribution", the United States company said in a press statement.
In addition to expanding PepsiCo's reach, the acquisition gives the company "a portfolio of well-established local brands - including well-known, scaled brands like Weet-Bix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko and White Star - providing [PepsiCo] with a significant runway of locally-relevant products", according to analysis from Wells Fargo.More news: Heat warning in effect for Friday and Saturday
As rationale for the acquisition, PepsiCo said that it believes Africa is a key market for future growth, and a meaningful portion of its existing portfolio is in developing and emerging markets where further expansion is a high priority. Pioneer Foods forms an important part of PepsiCo's strategy to expand not only in South Africa but in Sub-Saharan Africa as well.
PepsiCo became the largest food and beverage company in Russia in 2011, when it took control of Wimm-Bill-Dann Foods, a Russian dairy products supplier.
Pioneer Foods and Pepsi have had a long standing relationship.More news: Tyreek Hill can attend Chiefs training camp, participate in all activities
Tertius Carstens, the CEO of Pioneer Foods, said: "Today's announcement marks a very exciting milestone for Pioneer Foods and our people, and highlights the strength of what we have created". Visit MarketWatch.com for more information on this news.
"Following a disastrous period of economic growth under the rule of the African National Congress and [former President] Jacob Zuma, South African entities are valued at low multiples", he explained.
Zeder Investments, Pioneer's biggest shareholder with a 27% stake, will vote in favour of the deal, alongside investors holding more than half the food maker's stock. This new structure will not impact PepsiCo's reporting structure, and PepsiCo SSA will remain part of Europe sub-Saharan Africa from a financial reporting perspective. "We are looking to expand our footprint", PepsiCo executive Eugene Willemsen, who will head up the operation from Cape Town, told Bloomberg News.More news: New ‘Halloween’ Movies Set for 2020, 2021