Multinational Acquisition: Pepico and Quaker Oats

Week 8 Assignment: Multinational Acquisition

PepsiCo & Quaker Oats

“Multinational Acquisition: PepsiCo & Quaker Oats”

Briefly describe the acquisition you have selected.

PepsiCo, Inc. is a multinational corporation with product sales in over 200 countries and territories. One billion times per day, PepsiCo customers consume one of their numerous food and beverage products. The merger agreement between PepsiCo and Quaker Oats dated December 2, 2000 (completed acquisition on August 2, 2001) significantly increased PepsiCo’s market share and revenues. Therefore, consumers of PepsiCo products have increased exponentially, both in the United States and internationally.

Prior to acquiring Quaker Oats, PepsiCo was approaching “the global saturation point in terms of cola sales” (Jaffe, 2001). It is no secret that the world is trending toward healthier snacks and drinks. Medical studies linking soda consumption to childhood obesity will begin to eat away at PepsiCo’s profits. Acquiring Quaker Oats (the maker of Gatorade) will allow PepsiCo to expand further into the noncarbonated drink business.

The $13.4 billion stock acquisition (Sorkin & Winter, 2000) of Quaker Oats will seem like a bargain once profits from Gatorade and the Quaker snacks start rolling in. PepsiCo has the means and capability to distribute beverages AND snacks, as Frito Lay is their largest subsidiary. “Pepsi plans to use Quaker’s granola bars as the foundation of a line of healthy snacks” (Forbes.com, 2001). The noncarbonated beverage of Gatorade and healthy snacks of Quaker will give PepsiCo a competitive edge in keeping up with consumers’ demand of healthier products.

There were three distinct stipulations with PepsiCo’s acquisition of Quaker Oats. Two of these stipulations were mandated by the Federal Trade Commission due it its “fear of monopolization of the sports-market drink” (Jaffe, 2001). First, PepsiCo had to sell of its...