MILWAUKEE (AP) -- A deal for PepsiCo Inc. to buy out its two largest bottlers is still likely to happen, an analyst said Friday, even as both companies rejected a combined $6 billion offer this week.
Deutsche Bank analyst Marc Greenberg wrote in a note to clients that the rejections don't signal an end to the buyout, but PepsiCo will have to offer more money first.
Greenberg downgraded shares of PepsiAmericas and Pepsi Bottling Group to "Hold" from "Buy," saying that shares have already risen since Purchase, N.Y.-based PepsiCo's offer on April 20.
On Thursday, Minneapolis-based PepsiAmericas rejected the bid, following a similar rejection by Somers, N.Y.-based Pepsi Bottling Group earlier in the week. Both bottlers say the buyout undervalues their companies.
PepsiCo -- which sells Gatorade, Mountain Dew, Tropicana and other drinks -- has said it wants to buy its bottlers so it can control its North American beverage volume, save up to $200 million a year and respond more quickly to a changing marketplace. PepsiCo owns about 33 percent of Pepsi Bottling Group and 43 percent of PepsiAmericas.
Greenberg said the acquisition "dance," including the rejections and PepsiCo's response that the offer is fair, follows a "familiar choreography," he said.
"Rationale to negotiate a deal remains strong," he said. "We also believe PepsiCo may pony up slightly more to close quickly, avoiding bad feelings or system disruption."
But Greenberg pointed out that no alternative bid exists and underlying bottler volume trends remain negative. The two bottlers' shares have already risen due to the offers, and the risk/rewards to the stock are more balanced, so he downgraded them.
Pepsi's offers equated to $29.50 per for share for Pepsi Bottling Group and $23.27 per share for PepsiAmericas. Greenberg said it's likely the eventual bid price will move to the mid $30s for Pepsi Bottling Group and the high $20s for PepsiAmericas.
Shares of Pepsi Bottling Group fell 2 cents to $32.16 in midday trading Friday, while shares of PepsiAmericas rose 1 cent to $25.28. Shares of PepsiCo fell 14 cents to $49.63.