beatandraise : SEC Filings Research with AI

beatandraise.com

2.0.0.10 false Acquisitions of PBG and PAS 111 - Disclosure - Acquisitions of PBG and PAS true false false false 1 usd $ false false iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 iso4217_USD_per_shares Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares 0 5 Acquisitions of PBG and PAS 3 us-gaap_BusinessCombinationDisclosureTextBlock us-gaap true na duration string No definition available. false false false false false false false false false false false false 1 false false false false 0 0 <div> Acquisitions of PBG and PAS   On February 26, 2010, PepsiCo announced that pursuant to the terms of merger agreements entered into on August 3, 2009 (the “Merger Agreements”), PBG and PAS merged with and into Pepsi-Cola Metropolitan Bottling Company, Inc. (“Metro”), with Metro continuing as the surviving corporation and a wholly owned subsidiary of PepsiCo. We acquired PBG and PAS to create a more fully integrated supply chain and go-to-market business model, improving the effectiveness and efficiency of the distribution of our brands and enhancing our revenue growth. The total purchase price was approximately $12.6 billion, which included $8.3 billion of cash and equity and the fair value of our previously held equity interests in PBG and PAS of $4.3 billion. Under the terms of the Merger Agreements: (i) each outstanding share of common stock of PBG not held by Metro, PepsiCo or a subsidiary of PepsiCo or held by PBG as treasury stock (each, a “PBG Share”) was canceled and converted into the right to receive, at the holder’s election, either 0.6432 shares of common stock of PepsiCo (the “PBG Per Share Stock Consideration”) or $36.50 in cash, without interest (the “PBG Cash Election Price”), subject to proration provisions which provide that an aggregate 50% of such outstanding PBG Shares were converted into the right to receive common stock of PepsiCo and an aggregate 50% of such outstanding PBG Shares were converted into the right to receive cash and each PBG Share and share of Class B common stock of PBG held by Metro, PepsiCo or a subsidiary of PepsiCo was canceled or converted to the right to receive 0.6432 shares of common stock of PepsiCo; and (ii) each outstanding share of common stock of PAS not held by Metro, PepsiCo or a subsidiary of PepsiCo or held by PAS as treasury stock (each, a “PAS Share”) was canceled and converted into the right to receive, at the holder’s election, either 0.5022 shares of common stock of PepsiCo (the “PAS Per Share Stock Consideration”) or $28.50 in cash, without interest (the “PAS Cash Election Price”), subject to proration provisions which provide that an aggregate 50% of such outstanding PAS Shares were converted into the right to receive common stock of PepsiCo and an aggregate 50% of such outstanding PAS Shares were converted into the right to receive cash and each PAS Share held by Metro, PepsiCo or a subsidiary of PepsiCo was canceled or converted into the right to receive 0.5022 shares of common stock of PepsiCo. Each PBG or PAS stock option was converted into an adjusted PepsiCo stock option to acquire a number of shares of PepsiCo common stock, determined by multiplying the number of shares of PBG or PAS common stock subject to the PBG or PAS stock option by an exchange ratio (the “Closing Exchange Ratio”) equal to the closing price of a share of PBG or PAS common stock on the business day immediately before the acquisition date divided by the closing price of a share of PepsiCo common stock on the business day immediately before the acquisition date. The exercise price per share of PepsiCo common stock subject to the adjusted PepsiCo stock option is equal to the per share exercise price of PBG or PAS stock option divided by the Closing Exchange Ratio. Each PBG restricted stock unit (RSU) was adjusted so that its holder is entitled to receive, upon settlement, a number of shares of PepsiCo common stock equal to the number of shares of PBG common stock subject to the PBG RSU multiplied by the PBG Per Share Stock Consideration. PBG performance-based RSUs were converted into PepsiCo RSUs based on 100% target achievement, and, following conversion, remain subject to continued service of the holder. Each PBG RSU held by a non-employee director was vested and canceled at the acquisition date, and, in exchange for cancellation of the PBG RSU, the holder received the PBG Per Share Stock Consideration for each share of PBG common stock subject to the PBG RSU.   Each cash-settled PAS RSU was canceled in exchange for a cash payment equal to the closing price of a share of PAS common stock on the business day immediately before the closing of the PAS merger for each share of PAS common stock subject to each PAS RSU. Each PAS restricted share was converted into either the PAS Per Share Stock Consideration or the PAS Cash Election Price, at the election of the holder, with the same proration procedures applicable to PAS stockholders described above. Pursuant to the terms of PBG’s executive retention arrangements, PBG equity awards granted to certain executives prior to the PBG merger vest immediately upon a qualifying termination of the executive’s employment except for certain PBG executives whose equity awards vested immediately at the effective time of the PBG merger pursuant to the terms of PepsiCo’s executive retention agreements. Each PAS equity award granted prior to the PAS merger vested immediately at the effective time of the PAS merger pursuant to the original terms of the awards. Prior to the mergers, we had equity investments in PBG and PAS. In addition to approximately 32% of PBG’s outstanding common stock that we owned at year-end 2009, we owned 100% of PBG’s class B common stock and approximately 7% of the equity of Bottling Group, LLC, PBG’s principal operating subsidiary. At year-end 2009, we owned approximately 43% of the outstanding common stock of PAS. The guidance on accounting for business combinations requires that an acquirer remeasure its previously held equity interest in an acquiree at its acquisition date fair value and recognize the resulting gain or loss in earnings. Thus, in connection with our acquisitions of PBG and PAS, the carrying amounts of our previously held equity interests in PBG and PAS were revalued to fair value at the acquisition date, resulting in a gain in the first quarter of 2010 of $958 million, comprising $735 million which is non-taxable and recorded in bottling equity income and $223 million related to the reversal of deferred tax liabilities associated with these previously held equity interests. As discussed in Debt Obligations and Commitments, in January 2010, we issued $4.25 billion of fixed and floating rate notes. A portion of the net proceeds from the issuance of these notes was used to finance our acquisitions of PBG and PAS. Our actual stock price on February 25, 2010 (the last trading day prior to the closing of the mergers) was used to determine the value of stock, stock options and RSUs issued as consideration in connection with our acquisitions of PBG and PAS and thus to calculate the actual purchase price.   The table below represents the computation of the purchase price excluding assumed debt and the fair value of our previously held equity interests in PBG and PAS as of the acquisition date:   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="74%"></td> <td valign="bottom" width="10%"></td> <td></td> <td valign="bottom" width="10%"></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">Total Number of Shares/Awards Issued</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Total Estimated Fair  Value</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Payment in cash, for the remaining (not owned by PepsiCo and its subsidiaries) outstanding shares of PBG and PAS common stock and equity awards vested at consummation of merger </td> <td valign="bottom">  </td> <td valign="bottom" align="right">–</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,813</td> </tr> <tr> <td valign="top"> Payment to PBG and PAS of shares of PepsiCo common stock for the remaining (not owned by PepsiCo and its subsidiaries) outstanding shares of PBG and PAS common stock and equity awards vested at consummation of merger </td> <td valign="bottom">  </td> <td valign="bottom" align="right">67</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4,175</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Issuance of PepsiCo equity awards (vested and unvested) to replace existing PBG and PAS equity awards </td> <td valign="bottom">  </td> <td valign="bottom" align="right">16</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">276</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr> <td valign="top"> Total purchase price </td> <td valign="bottom">  </td> <td valign="bottom" align="right">83</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">8,264</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> </tr> </table> The following table summarizes the preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed in the PBG and PAS acquisitions and the resulting goodwill as of the acquisition date. The preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed are subject to revisions, which may result in adjustments to the preliminary values presented below, when appraisals are finalized. We expect to finalize these amounts as soon as possible but no later than by the end of 2010.   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="84%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Preliminary Estimates of Acquisition Date Fair Value</td> <td valign="bottom"> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Inventory </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">983</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Property, plant and equipment </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">6,568</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Amortizable intangible assets </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,219</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Nonamortizable intangible assets, primarily reacquired franchise rights </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">9,654</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Other current assets and current liabilities(a) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">764</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Other noncurrent assets </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">278</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Debt obligations </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(8,814</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr> <td valign="top"> Pension and retiree medical benefits </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(959</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Other noncurrent liabilities </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(455</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr> <td valign="top"> Deferred income taxes </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(3,683</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Total identifiable net assets </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">5,555</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Goodwill </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">6,684</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Subtotal </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">12,239</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Fair value of acquisition of noncontrolling interest </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">317</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Total purchase price </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">12,556</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="5%" align="justify"> (a) </td> <td valign="top" align="left"> Includes cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and other current liabilities. </td> </tr> </table>   Goodwill is calculated as the excess of the purchase price paid over the net assets recognized. The goodwill recorded as part of the PBG and PAS acquisitions primarily reflects the value of adding PBG and PAS to PepsiCo to create a more fully integrated supply chain and go-to-market business model, as well as any intangible assets that do not qualify for separate recognition. Goodwill is not amortizable nor deductible for tax purposes. While the final calculation of goodwill and its allocation among reporting units is not complete, substantially all of the goodwill is recorded in our PAB segment. In connection with our acquisitions of PBG and PAS, we reacquired certain franchise rights which had previously provided PBG and PAS with the exclusive and perpetual rights to manufacture and/or distribute beverages for sale in specified territories. Reacquired franchise rights totaling $8.5 billion were assigned a perpetual life and are, therefore, not amortizable. Amortizable acquired franchise rights of $0.9 billion have weighted-average estimated useful lives of 43 years. Other amortizable intangible assets, primarily customer relationships, have weighted-average estimated useful lives of 20 years. Under the guidance on accounting for business combinations, merger and integration costs are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred. See Restructuring, Impairment and Integration Charges for details on the expenses incurred during the 12 weeks ended March 20, 2010. The following table presents unaudited consolidated pro forma financial information as if the closing of our acquisitions of PBG and PAS had occurred on December 27, 2009 for purposes of the financial information presented for the 12 weeks ended March 20, 2010; and as if the closing of our acquisitions of PBG and PAS had occurred on December 28, 2008 for purposes of the financial information presented for the 12 weeks ended March 21, 2009.   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="82%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="6" align="center">(unaudited) 12 Weeks Ended</td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">3/20/10</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">3/21/09</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Net Revenue </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,112</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,083</td> </tr> <tr> <td valign="top"> Net Income Attributable to PepsiCo </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">966</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,200</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Net Income Attributable to PepsiCo per Common Share – Diluted </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.58</td> <td valign="bottom" nowrap="nowrap">(a)  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.73</td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="5%" align="justify"> (a) </td> <td valign="top" align="left"> Includes PBG/PAS merger and integration costs, inventory fair value adjustments and the gain on previously held equity interests. </td> </tr> </table> The unaudited consolidated pro forma financial information was prepared in accordance with the acquisition method of accounting under existing standards, and the regulations of the U.S. Securities and Exchange Commission, and is not necessarily indicative of the results of operations that would have occurred if our acquisitions of PBG and PAS had been completed on the dates indicated, nor is it indicative of the future operating results of PepsiCo. The historical unaudited consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the acquisitions, (2) factually supportable, and (3) expected to have a continuing impact on the combined results of PepsiCo, PBG and PAS. The unaudited pro forma results have been adjusted with respect to certain aspects of our acquisitions of PBG and PAS to reflect:   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td width="1%"> </td> <td valign="top" width="3%" align="justify"> • </td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> the consummation of the acquisitions; </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td width="1%"> </td> <td valign="top" width="3%" align="justify"> • </td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> consolidation of PBG and PAS which are now owned 100% by PepsiCo and the corresponding gain resulting from the remeasurement of our previously held equity interests in PBG and PAS; </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td width="1%"> </td> <td valign="top" width="3%" align="justify"> • </td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> the elimination of related party transactions between PepsiCo and PBG, and PepsiCo and PAS; </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td width="1%"> </td> <td valign="top" width="3%" align="justify"> • </td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> changes in assets and liabilities to record their preliminary estimated acquisition date fair values and changes in certain expenses resulting therefrom; </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td width="1%"> </td> <td valign="top" width="3%" align="justify"> • </td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> additional indebtedness, including, but not limited to, debt issuance costs and interest expense, incurred in connection with the acquisitions; and </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td width="1%"> </td> <td valign="top" width="3%" align="justify"> • </td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> merger and integration charges associated with the acquisitions. </td> </tr> </table> The unaudited pro forma results do not reflect future events that may occur after the acquisitions, including, but not limited to, the anticipated realization of ongoing savings from operating synergies in subsequent periods. They also do not give effect to certain one-time charges we expect to incur in connection with the acquisitions, including, but not limited to, charges that are expected to achieve ongoing cost savings and synergies. </div> Acquisitions of PBG and PAS   On February 26, 2010, PepsiCo announced that pursuant to the terms of merger agreements entered into on false false false Description of a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. This element may be used as a single block of text to encapsulate the entire disclosure (including data and tables) regarding business combinations, including leverage buyout transactions (as applicable). Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141 -Paragraph 51, 52 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 88-16 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141R -Paragraph 67-73 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141R -Paragraph F4 -Subparagraph e -Appendix F false false 1 1 false UnKnown UnKnown UnKnown false true