Acquisitions & Divestitures

8 Months Ended

Sep. 03, 2022

Acquisitions & Divestitures [Abstract]

2020 Acquisitions

In 2020, we acquired Pioneer Food Group Ltd. (Pioneer Foods), Rockstar Energy Beverages (Rockstar) and Hangzhou Haomusi Food Co., Ltd. (Be & Cheery). The purchase price allocations for each of these acquisitions were finalized in the second quarter of 2021. See Note 13 to our consolidated financial statements in our 2021 Form 10-K for further information.

Juice Transaction

In the 12 weeks ended March 19, 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners for approximately $3.5 billion in cash, subject to purchase price adjustments, and a 39% noncontrolling interest in the Tropicana JV, operating across North America and Europe. The North America portion of the transaction was completed on January 24, 2022 and the Europe portion of the transaction was completed on February 1, 2022. In the United States, PepsiCo acts as the exclusive distributor for Tropicana JV’s portfolio of brands for small-format and foodservice customers with chilled direct-store-delivery. We have significant influence over our investment in the Tropicana JV and account

for our investment under the equity method, recognizing our proportionate share of Tropicana JV’s earnings on our income statement (recorded in selling, general and administrative expenses).

As a result of this transaction, in the 36 weeks ended September 3, 2022, we recorded a pre-tax gain of $3.3 billion ($2.9 billion after-tax or $2.07 per share) in our PBNA and Europe divisions, including $525 million related to the remeasurement of our 39% ownership in the Tropicana JV at fair value using a combination of the transaction price, discounted cash flows and an option pricing model related to our liquidation preference in the Tropicana JV. In the 12 weeks ended September 3, 2022, we recorded certain purchase price adjustments for net working capital and net debt amounts, which reduced the transaction price and resulted in the recognition of pre-tax expense of $14 million ($11 million after-tax or $0.01 per share) in our PBNA and Europe divisions. In the fourth quarter of 2022, we expect to finalize the purchase price adjustments for net working capital and net debt amounts as of the transaction close date compared to targeted amounts set forth in the purchase agreement.

A summary of income statement activity related to the Juice Transaction in the 36 weeks ended September 3, 2022 is as follows:


	PBNA		Europe		Corporate		Total PepsiCo		Provision for income taxes(a)		Net income attributable to PepsiCo		Impact on net income attributable to PepsiCo per common share
Gain associated with the Juice Transaction	$	(3,029)	$	(292)	$	—	$	(3,321)	$	452	$	(2,869)	$	2.07
Acquisition and divestiture-related charges	42		13		6		61		(10)		51		(0.04)
Operating profit	$	(2,987)	$	(279)	$	6	(3,260)		442		(2,818)		2.03
Other pension and retiree medical benefits income (b)							(10)		3		(7)		0.01
Total Juice Transaction							$	(3,270)	$	445	$	(2,825)	$	2.03	(c)

(a)Includes $194 million of deferred tax expense related to the recognition of our investment in the Tropicana JV.

(b)Includes $16 million curtailment gain, partially offset by $6 million special termination benefits.

(c)Does not sum due to rounding.

In connection with the sale, we entered into a transition services agreement with PAI Partners, under which we provide certain services to the Tropicana JV to help facilitate an orderly transition of the business following the sale. In return for these services, the Tropicana JV is required to pay certain agreed upon fees to reimburse us for our costs without markup.

Acquisition and Divestiture-Related Charges

Acquisition and divestiture-related charges primarily include merger and integration charges and costs associated with divestitures. Merger and integration charges include changes in fair value of contingent consideration, liabilities to support socioeconomic programs in South Africa, employee-related costs, contract termination costs and other integration costs. Divestiture-related charges reflect transaction expenses, including consulting, advisory and other professional fees.

A summary of our acquisition and divestiture-related charges is as follows:


	12 Weeks Ended				36 Weeks Ended
	9/3/2022		9/4/2021		9/3/2022		9/4/2021		Transaction
FLNA	$	—	$	—	$	—	$	2	BFY Brands, Inc.
PBNA	3		—		42		2		Juice Transaction, Rockstar
Europe	—		—		13		—		Juice Transaction
AMESA	2		1		2		8		Pioneer Foods
APAC	—		—		—		3		Be & Cheery
Corporate (a)	—		(4)		6		(3)		Juice Transaction, Rockstar
Total (b)	5		(3)		63		12
Other pension and retiree medical benefits expense	—		—		6		—		Juice Transaction
Total acquisition and divestiture-related charges	$	5	$	(3)	$	69	$	12
After-tax amount	$	3	$	(2)	$	57	$	12
Impact on net income attributable to PepsiCo per common share	$	—	$	—	$	(0.04)	$	(0.01)

(a)Income amounts primarily relate to the change in the fair value of contingent consideration associated with our acquisition of Rockstar.

(b)Recorded primarily in selling, general and administrative expenses.